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A  STUDY  OF  THE  BUSINESS  ADMINISTRATION 
OF  COLLEGES  BASED  ON  AN  EXAMINATION  OF 
THE  PRACTICES  OF  LAND-GRANT  COLLEGES 
IN  THE  MAKING  AND  USING  OF  BUDGETS 


A  DISSERTATION 

SUBMITTED  TO  THE  FACULTY 

OF   THE   GRADUATE  SCHOOL  OF   ARTS  AND  LITERATURE 

IN  CANDIDACY  FOR  THE  DEGREE   OF 

DOCTOR   OF  PHILOSOPHY 

DEPARTMENT  OF  EDUCATION 


BY 

JULIAN  ASHBY  BURRUSS 


Private  Edition,  Distributed  By 

THE  UNIVERSITY  OF  CHICAGO  LIBRARIES 

CHICAGO,  ILLINOIS 

1921 


mnix>er0its  of  Cbicago 


A  STUDY  OF  THE  BUSINESS  ADMINISTRATION 
OF  COLLEGES  BASED  ON  AN  EXAMINATION  OF 
THE  PRACTICES  OF  LAND-GRANT  COLLEGES 
IN  THE  MAKING  AND  USING  OF  BUDGETS 


A  DISSERTATION 

SUBMITTED  TO   THE  FACULTY 

OF  THE   GRADUATE   SCHOOL   OF   ARTS   AND   LITERATURE 

IN  CANDIDACY  FOR  THE  DEGREE   OF 

DOCTOR   OF   PHILOSOPHY 

DEPARTMENT  OF  EDUCATION 


BY      . 

JULIAN  ASHBY  BURRUSS 


Private  Edition,  Distributed  By 

THE  UNIVERSITY  OF  CHICAGO  LIBRARIES 

CHICAGO,  ILLINOIS 

1921 


PREFACE 

A  brief  form  of  the  dissertation  is  presented  herewith,  the 
complete  dissertation  being  on  file  in  the  University  of  Chicago 
Libraries.  The  table  of  contents,  the  list  of  tables,  and  the  list  of 
forms,  on  the  following  pages,  indicate  what  is  included  in  the  com- 
plete copy.  This  brief  copy  contains  an  account  of  the  sources  of 
the  data  and  the  method  pursued  in  the  investigation,  the  introduc- 
tory sections  of  the  various  chapters,  and  the  conclusions  and 
recommendations  in  full.  Footnotes  indicate  the  pages  of  the  com- 
plete dissertation  on  which  the  omitted  sections  may  be  found. 


iii 


CONTENTS 

CHAPTER  PAGE 

CONTENTS  OF  COMPLETE  DISSERTATION vii 

LIST  OF  TABLES xi 

LIST  OF  FORMS  Now  IN  USE xiii 

I.  INTRODUCTION i 

II.  SELECTED  SOURCES  AND  METHODS  OF  COLLECTING  DATA    .       .  7 

III.  GENERAL  ADMINISTRATION  OF  FINANCES n 

IV.  THE  ORIGINAL,  OR  TENTATIVE,  BUDGET 14 

V.  THE  FINAL,  OR  WORKING,  BUDGET 19 

VI.  BUDGET  FORMS  AND  CLASSIFICATIONS 24 

VII.  ACCOUNTING  AS  A  BASIS  FOR  BUDGET-MAKING      ....  29 

VIII.  SALARIES  IN  BUDGETS  AND  ACCOUNTING 35 

IX.  MANAGEMENT  OF  SUPPLIES  AND  INVENTORIES       ....  38 

X.  COLLECTING,  PAYING,  AND  REPORTING 42 

XI.  SOME  ADDITIONAL  CONSIDERATIONS  IN  BUDGET-MAKING     .       .  46 

XII.  REPORTING  FINANCIAL  FACTS 50 

XIII.  OBJECTIVES  AND  RESULTS 54 


CONTENTS  OF  COMPLETE  DISSERTATION 

CHAPTER  PAGE* 

LIST  OF  TABLES vi 

LIST  OF  FORMS  Now  IN  USE vii-viii 

I.  INTRODUCTION i 

A.  Importance  of  the  Financial  Aspect  of  Institutional  Adminis- 

tration 

B.  The  Place  of  the  Budget  in  Financial  Administration 

C.  Purposes  of  This  Investigation 

D.  Limitations  of  This  Study 

E.  Literature  of  the  Field 

F.  Sources  of  Data 

II.  SELECTED  SOURCES  AND  METHODS  OF  COLLECTING  DATA      .       .        9 

A.  Type  and  Location  of  Institutions  Selected  for  Special  Study 

B.  Enrolment  Data  of  Selected  Institutions 

C.  Financial  Data  of  Selected  Institutions 

D.  Questions  Used  in  Personal  Interviews 

E.  Summary  of  Replies  to  Questions 

F.  General  Information  as  to  Budget  Practice 

G.  Conclusions  and  Recommendations 

III.  GENERAL  ADMINISTRATION  OF  FINANCES 21 

A.  Relation  to  the  Federal  Government 

B.  Summary  of  Replies  to  Questions 

C.  Legal  Provisions  and  Restrictions 

D.  Relations  to  Governmental  Agencies  and  Officials 

E.  Distribution  of  Responsibilities  and  Functions  outside  of  the 

Working  Organization  of  the  Institution 

F.  Distribution  of  Responsibilities  and   Functions  within  the 

Institution 

G.  Policies  of  Administrative  Authorities  in  the  Formulation  of 

Budgets 

H.  Examples  of  Organization  of  Business  Activities 
I.  Conclusions  and  Recommendations 

IV.  THE  ORIGINAL,  OR  TENTATIVE,  BUDGET 41 

A.  Definition  and  Relationship 

B.  General  Practice  in  the  Several  States 

1  Page  numbers  refer  to  the  pages  of  the  complete  dissertation. 

vii 


viii  CONTENTS  OF  COMPLETE  DISSERTATION 

C.  Summary  of  Replies  to  Questions 

D.  Formulation  of  the  Initiatory  Budget 

E.  Revision  by  Higher  Authorities 

F.  Submission  to  and  Consideration  by  the  Appropriating  Agency 

G.  Sources  of  Support  and  Adequacy  of  the  Same 
H.  Examples  of  Current  Request  Budgets 

I.  Specimens  of  Forms  for  the  Original  Budget 
J.  Conclusions  and  Recommendations 

V.  THE  FINAL,  OR  WORKING,  BUDGET 78 

A.  Definition  and  Relationship 

B.  Summary  of  Replies  to  Questions 

C.  Form  of  Appropriations  and  Restrictions  as  to  Use 

D.  Revision  of  the  Budget  into  Its  Final  or  Working  Form 

E.  Approval  of  Higher  Authorities 

F.  Administration  of  Amounts  after  Allocation  to  the  Depart- 

ments 

G.  Significance  as  a  Means  of  Control 
H.  Flexibility  of  the  Working  Budget 

I.  Adequacy  of  Working  Budget  Systems 
J.  Specimens  of  Forms  for  the  Working  Budget 
K.  Conclusions  and  Recommendations 

VI.  BUDGET  FORMS  AND  CLASSIFICATIONS 112 

A.  Importance  and  Difficulties  of  Classification 

B.  Summary  of  Replies  to  Questions 

C.  Main  Divisions  with  Separate  Budgets 

D.  Organization  of  the  Budget 

E.  The  Two  Principal  Parts  of  Every  Budget 

F.  Classification  of  Income 

G.  Classification  of  Expenditures 

H.  Specimens  of  Classifications  in  Use 
I.  Examples  of  Working  Budgets 
J.  Conclusions  and  Recommendations 

VII.  ACCOUNTING  AS  A  BASIS  FOR  BUDGET-MAKING        ....     139 

A.  Purposes  of  College  Accounting 

B.  Summary  of  Replies  to  Questions 

C.  State  System  Requirements 

D.  Classifications  Used  in  Accounting 

E.  The  Fiscal  Period 

F.  Separation  of  Accounts 

G.  Cost  Accounting 

H.  Special  Considerations  in  Accounting 


CONTENTS  OF  COMPLETE  DISSERTATION  ix 

I.  Adequacy  of  Accounting  Systems 
J.  Specimens  of  Forms  Used  in  Accounting 
K.  Conclusions  and  Recommendations 

VIII.  SALARIES  IN  BUDGETS  AND  ACCOUNTING 172 

A.  Relative  Position  of  Payments  for  Personal  Service 

B.  Summary  of  Replies  to  Questions 

C.  Relation  to  the  Fiscal  Period 

D.  Salary  Schedules  and  Standardization 

E.  Salary-Fixing  in  the  Budget  and  Salary-Accounting 

F.  Recording  and  Adjusting  Salary  Changes  in  the  Working 

Budget 

G.  Specimens  of  Forms  Used  in  Connection  with  Salaries 
H.  Conclusions  and  Recommendations 

IX.  MANAGEMENT  OF  SUPPLIES  AND  INVENTORIES 196 

A.  Importance  of  This  Phase  of  Business  Management 

B.  Summary  of  Replies  to  Questions 

C.  Inventory  Systems 

D.  Standardization  of  Supplies 

E.  Purchase  of  Supplies 

F.  Requisitioning  for,  and  Distribution  of,  Supplies 

G.  Accounting  for  Supplies 

H.  Adequacy  of  Systems  for  Handling  Supplies 
I.  Specimens  of  Forms  Used  in  Connection  with  Supplies 
J.  Conclusions  and  Recommendations 

X.  COLLECTING,  PAYING,  AND  REPORTING      .       .       .       .       .       .232 

A.  Varying  Practice  in  the  Handling  of  Funds 

B.  Federal  and  State  Funds 

C.  Summary  of  Replies  to  Questions 

D.  Charges  to  Students  and  Their  Collection 

E.  Collection  of  Charges  to  Others 

F.  Payment  of  Accounts 

G.  Reports  of  Collections,  Deposits,  etc. 
H.  Student  Deposit  and  Checking  Systems 

I.  Specimens  of  Forms  Used  in  the  Handling  of  Funds 
J.  Conclusions  and  Recommendations 

XI.  SOME  ADDITIONAL  CONSIDERATIONS  IN  BUDGET-MAKING       .       .     271 

A.  Determination  of  Bases  for  Budget-Making 

B.  Summary  of  Replies  to  Questions 

C.  General  Policies  in  Budget-Making 

D.  Repairs 


X  CONTENTS  OF  COMPLETE  DISSERTATION 

E.  Insurance 

F.  Depreciation 

G.  Scholarships  and  Student  Aid 
H.  Adequacy  of  Budget  Systems 

I.  Conclusions  and  Recommendations 

XII.  REPORTING  FINANCIAL  FACTS 285 

A.  Purpose  and  Importance  of  Reporting 

B.  Summary  of  Replies  to  Questions 

C.  Financial  Data  in  Reports  of  Presidents  and  Other  Officials 

D.  Content  of  Financial  Reports  Compared 

E.  Special  Features  in  Certain  Reports 

F.  Specimens  of  Forms  Used  in  Reports 

G.  Conclusions  and  Recommendations 

XIII.  OBJECTIVES  AND  RESULTS 3°5 

A.  College  Objectives  as  Determining  Support 

B.  Summary  of  Replies  to  Questions 

C.  The  Value  of  a  Budget  System  to  the  College  Administration 

D.  The  Value  of  a  Budget  System  to  the  Public 

E.  Extension  of  the  Budget  System 

F.  The  Budget  as  an  Aid  to  Progress 

G.  Location  of  Commendable  Systems 
H.  Conclusions  and  Recommendations 

BIBLIOGRAPHY  32* 


LIST  OF  TABLES 

TABLE  PAGE1 

I.  States  Included  and  Type  of  Institutions 10 

II.  Enrolment  Data,  1920 n 

III.  Financial  Data  for  the  Selected  Institutions — Amounts  Avail- 

able for  Various  Purposes,  1920 12 

IV.  Summary  of  Replies  to  the  Introductory  Questions         .       .  14 

V.  Summary  of  Replies  to  Questions  Concerning  General  Admin- 
istration of  Finances 26 

VI.  Summary  of  Replies  to  Questions  Concerning  the  Original,  or 

Tentative,  Budget 47~49 

VII.  Federal  Support  of  Land-Grant  Colleges 64 

VIII.  Amount  and  Sources  of  Current  Income  for  Operation  and 

Outlay  at  Certain  Land-Grant  Colleges 66 

IX.  Summary  of  Replies  to  Questions  Concerning  the  Final,  or 

Working,  Budget 81-83 

X.  Summary  of  Replies  to  Questions  Concerning  Budget  Forms 

and  Classification 115-16 

XL  Summary  of  Replies  to  Questions  Concerning  Accounting  as  a 

Basis  for  Budget-Making 144-46 

XII.  Summary  of  Replies  to  Questions   Concerning  Salaries  in 

Budgets  and  Accounting 174 

XIII.  Summary  of  Replies  to  Questions  Concerning  the  Management 

of  Supplies  and  Inventories 198-99 

XIV.  Summary  of  Replies  to  Questions  Concerning  the  Collecting 

of  Funds 235 

XV.  Summary  of  Replies  to  Questions  Concerning  Further  Con- 
siderations in  Budget-Making 273 

XVI.  Summary   of   Replies    to    Questions    Concerning   Financial 

Reports 287 

XVII.  Contents  of  Financial  Reports  Compared 291 

XVIII.  Summary  of  Replies  to  Questions  Concerning  Results  of  the 

Budget  System,  etc 310-11 

1  Page  numbers  refer  to  the  pages  of  the  complete  dissertation. 


LIST  OF  FORMS  NOW  IN  USE 

PAGE 

Estimates  of  Revenue  and  Requests  for  the  Original,  or  Tentative, 

Budget 70-72 

Estimates  for  the  Working  Budget 97-100 

Budget  Apportionment 101 

Budget  Control  Ledgers 102-3 

Monthly  Control  Statements 103-5 

Summary  Revenue  and  Expense  Report 106 

Budget  Classification  Instruction  Sheet 123 

Budget  Classifications 125-27 

Working  Budgets 129-34 

Distribution  Ledgers 159-62 

General  or  Summary  Ledgers 163 

Salary  and  Wage  Ledger 164 

Experiment  Station  Ledger 165 

Extension  Division  Ledger 166 

Standardization  of  Salaries 181 

Departmental  Requests  for  Salary  Budget 182 

Compilation  of  Salary  Budget  Data 183 

Salary  Budget  Ledger 184 

Budget  Changes  in  Salaries 184 

Pay-Roll 184-86 

Record  of  Salary  Payments 185 

Salary  Check  and  Receipt 187 

Salary  Deposit  Authorization 187 

Notices  of  Appointment,  Resignation,  Promotion,  etc.          ~       .       .  188-92 

Inventory  Records 208-11 

Requisitions 212-17 

Quotations 218-19 

Purchase  Orders 220-21 

Purchasing  Notices  to  Departments 222 

Tracers  and  Replies  to  Inquiries  as  to  Orders  .        .        .        .        .        .  223 

Adjustment  Reports 224 

Receipt  for  Invoices  by  Departments 225 

Return  Material  Instructions 225 

Shipping  Label l.  225 

Purchasing  Ledger 226 

Order  Voucher  Index 226 

1  Page  numbers  refer  to  the  pages  of  the  complete  dissertation. 

xiii 


xiv  LIST  OF  FORMS  NOW  IN  USE 

Requisition  Ledger 227 

Firm  Ledger 227 

Requisitions  for  State  Funds  Appropriated 245-46 

Collecting  Student  Accounts 247-49 

Bills  for  Accounts  Due  the  College  for  Sales,  etc 250 

Interdepartmental  Business — Transfer  Checks  and  Vouchers        .       .  251-52 

Labor  Accounts 253 

Reimbursement  for  Travel  and  Personal  Expenses 254 

Invoices 255-56 

Combination  Check-Receipts 257-58 

Vouchers 259-61 

Reports  of  Cash  Transactions 262-64 

Department  Cash  Sales  and  Charge  Sheet 265 

Student  Banking  System 266 

Reporting  Financial  Facts    . 296-301 


CHAPTER  I 
INTRODUCTION 

A.      IMPORTANCE   OF  THE  FINANCIAL  ASPECT  OF  INSTITUTIONAL 
ADMINISTRATION 

Whenever  there  is  a  job  to  be  completed,  whether  it  be  the 
building  of  a  house  or  of  a  railroad,  the  manufacture  of  pins  or  of 
automobiles,  the  protection  of  the  community  from  disease  or  what 
not,  there  are  always  three  steps  that  must  be  taken  in  the  interest 
of  economy  and  efficiency.  First,  there  is  the  necessity  for  setting 
clearly  the  task,  determining  what  is  to  be  done,  the  grade  or 
standard  to  be  reached,  the  time  to  be  consumed.  Second,  there 
is  the  necessity  of  ascertaining  just  what  materials  and  workers, 
what  equipment  and  organization,  should  be  provided.  Third, 
there  is  the  necessity  for  calculating  the  cost  of  providing  the 
required  facilities  and  of  doing  the  work.  These  steps  should 
follow  each  other  in  this  logical  order. 

In  the  commercial  and  industrial  world  this  order  of  procedure 
has  long  been  customary.  Rule-of-thumb  methods  disappeared 
with  the  development  of  modern  large-scale  production.  This  has 
been  true  to  a  less  extent  in  the  educational  field.  Schools  and 
colleges  in  many  cases  continue  to  be  conducted  in  an  unbusiness- 
like manner.  This  has  been  true  of  public-supported  institutions 
as  well  as  of  those  privately  owned.  Inefficiency  and  waste  have 
been  tolerated  by  an  uninformed  and  heedless  public. 

There  is  no  sound  reason  why  an  educational  institution  should 
not  be  conducted  on  business  principles  as  well  as  an  industrial 
enterprise,  but  there  is  every  reason  why  it  should  be  done,  in  order 
that  the  public  may  have  its  interests  protected.  Depending  upon 
" log-rolling'7  and  "pork-barrel"  methods,  the  logical  order  of  the 
three  necessary  steps  has  been  often  reversed.  This  has,  in  the 
long  run  at  least,  resulted  in  a  loss  to  education  in  both  funds  and 
efficiency. 

In  recent  years  the  tendency  has  been  to  demand  a  closer 
accounting  for  public  funds.  Numerous  investigations  and  surveys 


2  A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

have  been  conducted,  and  commissions  on  retrenchment  and  effi- 
ciency in  a  number  of  states  have  made  reports.  With  increas- 
ing attention  to  the  financial  side  of  administration  has  come  a 
demand  for  better  business  methods,  and  this  applies  to  the  enter- 
prises of  education  as  well  as  to  those  of  trade  and  industry. 

B.      THE  PLACE   OF  THE  BUDGET  IN  FINANCIAL  ADMINISTRATION 

The  importance  of  the  budget  is  such  that  it  may  properly  be 
taken  as  a  center  for  the  study  of  the  entire  business  management 
of  an  institution,  as  indicated  in  the  following  diagram: 

Income 
Opportunities\  /Administration 

Ideals  NBUDGET/     Operation 

Plans  /          I         \     Maintenance 

Requests        /  I  \Development 

Outgo 

A  budget  is  a  statement  of  estimated  receipts  and  estimated 
expenditures  for  a  given  period.  Such  a  statement  is  of  value  in 
the  financial  administration  of  any  business,  and  the  larger  the 
undertaking,  the  more  important  the  budget  is.  Moreover,  the 
more  public  the  business  is,  the  more  necessary  is  it  that  there  be 
a  budget  setting  forth  clearly  the  financial  condition. 

A  budget  system,  when  properly  established  and  operated, 
should  accomplish  at  least  these  results,  namely: 

1.  It  should  furnish  a  complete  and  readily  understood  analysis 
of  the  entire  business  organization  and  management  of  the  institu- 
tion, for  the  guidance  of  those  within  and  the  enlightenment  of 
those  without. 

2.  It  should  cause  all  estimates  to  be  reviewed  by  an  official 
other  than  the  creator  of  the  original  estimates. 

3.  It  should  protect  against  indefinite  appropriations  for  any 
division  or  activity,  and  keep  all  in  due  proportion  according  to 
the  plans  of  the  institution  as  a  whole. 

4.  It  should  prevent  the  waste  sometimes  arising  from  the 
custom  of  many  institutions  to  estimate  in  excess  of  the  actual  needs 
in  the  expectancy  of  a  cut  by  the  legislature. 

5.  It  should  include  in  one  form  all  authorized  expenditures, 
enabling  department  heads  to  plan  in  advance. 


INTRODUCTION  3 

6.  It  should  provide  for  the  authorizing  of  expenditures  at  a 
time  when  the  revenues  to  meet  them  are  known  and  are  taken 
definitely  into  consideration,  thus  bringing  together  the  spending 
of  funds  and  the  providing  of  funds. 

7.  It  should  provide  for  an  independent  proof  by  audit,  as  to 
efficiency,  duplication,  or  waste,  in  the  various  activities. 

8.  It  should  enable  the  public  to  understand  the  financial  status 
of  an  institution,  and  the  reason  for  expenditures  and  for  measures 
of  economy. 

The  adoption  of  state  budget  systems  in  an  increasing  number, 
and  the  recent  inauguration  of  a  national  budget  system,  are  giving 
impetus  to  the  movement  for  budget  systems  in  educational 
institutions,  and  we  may  expect  to  find  within  the  next  few  years 
budget-making  and  budget-using  in  all  colleges  supported  by  the 
state. 

C.      PURPOSES   OF   THIS  INVESTIGATION 

There  has  been  little  to  guide  the  college  official  in  the  establish- 
ment of  a  budget  system.  The  present  investigation  is  made  in 
the  belief  that,  by  presenting  the  practices  followed  in  various 
institutions,  the  way  will  be  made  easier  for  those  who  desire  to 
improve  their  business  methods.  While  limited  to  a  special  type 
of  college,  it  is  believed  that  the  findings  of  the  investigation  may 
be  readily  applied  to  colleges  of  any  type. 

The  purposes  of  the  study  may  be  stated  as  follows : 

1.  To  discover  and  evaluate  current  practices  of  budget-making 
and  budget-using  in  the  colleges. 

2.  To  compare  critically  the  methods  and  results  of  budget 
systems  at  typical  institutions. 

3.  To  discover  significant  facts  and  to  define  important  prin- 
ciples involved  in  budget-making  and  budget-using. 

4.  To  indicate  an  efficient  organization  for  financial  management 
in  such  institutions. 

5.  To  seek  the  most  adequate  and  efficient  system  of  classifica- 
tion and  accounting. 

6.  To  supply  practical  suggestions  as  to  organization,  aids,  and 
devices  for  the  budget  and  related  phases  of  business  adminis- 
tration. 


4          A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

7.  To  suggest  forms,  means,   and  methods  for  discovering, 
interpreting,  presenting,  and  applying  financial  facts. 

8.  To  discuss  analyses  of  income  and  expenditure,  and  the 
computation  of  unit  costs. 

9.  To  assist  college  officials  in  making  surveys  of  their  institu- 
tions, and  in  diagnosing,  controlling,  planning,  reorganizing,  and 
publishing  information  as  to  results  accomplished,  proposed  de- 
velopments, and  needs. 

10.  To  supply  the  general  public  with  criteria  for  judgment  as 
to  whether  public  funds  are  being  economically  and  efficiently 
administered  or  not. 

11.  To  indicate  some  progressive  tendencies  in  higher  education 
as  reflected  in  financial  administration. 

Both  as  to  method  and  purpose,  it  should  be  understood  that 
this  is  not  an  investigation  or  survey  of  any  institution  as  an  indi- 
vidual institution,  but  merely  the  gathering  of  certain  facts  from 
representatives  of  a  group  of  institutions  similar  in  type.  Best 
methods  were  sought  rather  than  faulty  ones  for  criticism. 

D.      LIMITATIONS   OF  THE   STUDY 

The  content  of  this  study  is  intended  to  be  representative  rather 
than  exhaustive.  A  particular  type  of  institution  has  been  chosen, 
and  it  is  believed  that  no  more  significant  type  may  be  found,  for 
here  we  have  combined  in  one  college,  support  from  the  federal 
government,  from  the  state,  and  from  other  sources.  All  the  people 
of  the  country  are  interested  directly  or  indirectly  in  such  a  college. 
Within  the  group  eighteen  out  of  the  forty-eight  institutions  have 
been  selected  for  intensive  study,  these  being  representative  of 
the  group. 

The  method  of  the  study  is  practical  rather  than  speculative, 
the  purpose  being  to  supply  working  plans  for  direct  application, 
based  on  what  is  actually  being  done  rather  than  on  what  theoreti- 
cally may  be  done. 

The  conclusions  and  recommendations  derived  from  the  various 
portions  of  the  study  are  intended  to  represent  the  best  practice 
of  the  present  time.  Budget-making  and  budget-using  in  education 
may  still  be  considered  an  innovation.  It  is  at  least  too  soon  to 


INTRODUCTION  5 

say  that  methods  of  procedure  have  been  definitely  fixed  by  long- 
established  custom.  It  is  necessary  to  recognize  the  fact  that 
what  is  best  practice  today  may  not  be  so  considered  tomorrow. 
Again,  there  is  no  uniformity  of  practice  among  the  institutions  of 
the  group.  It  would  be  hopeless  to  attempt  to  define  "  standard  " 
practice,  and  the  best  that  may  be  done  is  to  indicate  what  is 
considered  to  be  the  best  current  practice. 

E.      LITERATURE   OF  THE  FIELD 

Practically  no  literature  has  been  produced  in  this  particular 
field,  and  very  little  is  found  in  closely  related  fields.  There  are 
numerous  works  on  accounting,  but  few  of  these  relate  in  any 
appreciable  degree  to  even  general  budget-making,  and  no  special 
consideration  is  given  to  college  budgets. 

In  the  course  of  the  work  reference  has  been  made  to: 

1.  Reports  and  special  bulletins  of  the  United  States  Bureau 
of  Education. 

2.  Bulletins  of  the  Carnegie  Foundation  for  the  Advancement  of 
Teaching,  especially  Nos.  3,  5,  and  10. 

3.  Proceedings   of  the   Association    of  American   Agricultural 
Colleges  and  Experiment  Stations. 

4.  The  financial  reports  of  certain  institutions  included  in  the 
group. 

5.  The  distribution  budgets  and   the  appropriation  acts  of 
certain  states  in  which  the  colleges  of  the  group  are  located. 

6.  The  laws  of  the  federal  government  and  of  certain  states 
which  relate  to  budgets  and  appropriations. 

In  addition  to  the  foregoing  list,  a  considerable  number  of 
bulletins,  pamphlets,  and  periodical  articles  have  been  examined 
in  the  effort  to  discover  material  bearing  on  the  subject.  In 
most  cases  nothing  of  significance  was  discovered,  but  at  the  end 
of  this  report  will  be  found  a  list  of  such  as  furnished  information 
of  more  or  less  value  to  the  work. 

F.      SOURCES   OF  DATA 

The  data  used  here  have  been  gathered  almost  entirely  by 
personal  visitation  to  the  institutions  and  the  examination  of 
their  records,  forms,  and  reports.  These  visits  covered  a  period 


6          A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

of  about  six  weeks,  practically  continuously,  during  the  months  of 
October  and  November,  1920.  In  these  visits  a  set  of  238  questions 
was  used,  to  fix  definitely  the  information  along  certain  lines  and 
to  make  it  as  complete  as  possible  for  each  institution  and  compar- 
able among  them  all.  The  information  came  directly  from  those 
officials  at  each  institution  who  were  considered  there  to  be  best 
qualified  to  supply  it.  In  most  cases  such  officials  were  business 
managers  or  comptrollers,  but  in  some  instances  presidents, 
secretaries,  treasurers,  auditors,  purchasing  agents,  and  similar 
officials  were  consulted.  Record  was  made  immediately  upon  the 
receipt  of  the  information.  Access  to  ledgers,  control  accounts, 
purchasing  files,  inventories,  and  numerous  other  records  was 
readily  accorded  at  the  various  institutions,  and  these  were  ex- 
plained by  those  who  had  charge  of  them.  In  most  cases  samples 
of  forms,  including  ledger  pages,  classifications,  budget  sheets,  etc., 
were  secured,  together  with  copies  of  financial  reports  and  budgets 
in  complete  form. 

No  essential  portion  of  the  report  has  come  from  any  source  or 
by  any  method  other  than  the  foregoing,  although  occasional 
suggestions  and  minor  items  have  resulted  from  reading  the  refer- 
ences cited.  In  a  few  instances  data  for  tables  of  a  general  nature 
have  been  extracted  from  publications  of  the  United  States  Bureau 
of  Education  and  sources  of  similar  reliability;  but  the  validity  of 
the  conclusions  is  in  no  way  dependent  upon  these. 


CHAPTER  II 

SELECTED  SOURCES  AND  METHODS  OF 
COLLECTING  DATA 

A.      TYPE  AND   LOCATION  OF  INSTITUTIONS   SELECTED  FOR 
SPECIAL   STUDY 

Qualitatively  the  land-grant  colleges  group  themselves  into 
three  divisions,  thus: 

1.  Those  which  are  divisions  of  state  universities,  usually  in 
the  same  location. 

2.  Those  which  are  independent  of  state  universities,  and  which 
offer  instruction  in  agriculture  and  mechanic  arts. 

3.  Those  which  are  independent  of  state  universities,  and  which 
offer  instruction  in  some  particular  line  of  work  to  the  exclusion  of 
other  lines,  usually  agriculture  without  mechanic  arts,  or  engineer- 
ing, courses. 

In  a  few  cases  institutions  may  be  classified  in  more  than  one 
group.  Of  the  eighteen  colleges  included  in  the  study,  nine  may 
be  considered  as  falling  within  the  first  group,  eight  within  the 
second,  and  one  within  the  third — the  total  number  in  the  third 
group  being  quite  small. 

Quantitatively  the  colleges  may  be  ranked  according  to  student 
enrolment,  and  on  this  basis  divided  into  quarters.  If  this  be  done, 
ten  of  the  eighteen  fall  within  the  upper  quarter,  two  within  the 
next  highest,  three  within  the  next  to  the  lowest,  and  three  within 
the  lowest.  The  preponderance  of  those  in  the  upper  quarter  is 
justified  by  other  considerations  than  student  enrolment,  for  it  is 
presumed  that  in  the  larger  institutions  the  activities  are  more 
numerous  and  the  resources  greater,  and  that  consequently  the 
budgets  are  more  comprehensive  and  suggestive  than  those  of  the 
smaller  colleges. 

In  geographical  distribution  the  institutions  studied  cover 
fairly  well  the  New  England,  Middle  Atlantic,  and  North  Central 
groups  of  states. 


8 


A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 


In  types  of  budget  systems  in  operation  the  institutions  studied 
are  representative  of  those  usually  found.  There  are  variations 
from  these  types  here  and  there,  but  essentially  they  must  be  the 
same. 

The  states  included  in  the  study  are  indicated  in  the  following 
tables,  which  give  certain  general  information  concerning  the 
standing  of  the  respective  institutions. 

TABLE  I 
STATES  INCLUDED  AND  TYPE  OF  INSTITUTIONS 


Rank  by  Enrolment  in 
48  States* 

A'*** 
Part  of  State  University 

B 

Separate  College 

C 

Separate  College 
Limiting  Courses  to 
Agriculture 

2  

Illinois 

•2  .    . 

Indiana 

Massachusetts  f 



e.  . 

Iowa 

6 

Ohio 

8 

Wisconsin 

Michigan 

10 

Kansas 

ii 

Minnesota 

12 

Pennsylvania  f 

T2 

IMissouri 

23. 

Virginia 

27 

West  Virginia 

22 

New  Jersey 

*6 

Rhode  Island  f 

41 

Maryland 

At 

Connecticut  f 

46 

Delaware 

*Rank  based  on  U.S.  Bureau  of  Education  reports  for  1916-17. 
t  This  state  has  no  state  university. 


D.       QUESTIONS  USED   IN  PERSONAL  INTERVIEWS 

In  collecting  the  data,  a  mimeographed  form  was  used.  The 
form  was  headed  with  spaces  for  the  name  of  the  institution,  the 
date  of  the  visit,  and  the  names  of  the  officials  supplying  the  informa- 
tion. Following  this  were  238  questions,  which  were  either  asked 
directly  as  worded,  or  were  answered  in  the  course  of  the  conference 
without  being  directly  put. 

1  Sections  B-C  may  be  found  on  pages  11-12  of  typewritten  manuscript. 


SELECTED  SOURCES  AND  METHODS  OF  COLLECTING  DATA       9 

As  far  as  practicable  the  replies  have  been  tabulated  under  the 
different  question  numbers  in  the  several  chapters.  The  questions 
are  included  in  each  chapter  with  the  tabulations,  for  convenience 
of  reference 

F.2      GENERAL  INFORMATION  AS   TO  BUDGET  PRACTICE 

When  one  asks  at  an  institution  if  it  has  a  budget,  the  reply 
is  almost  invariably  in  the  affirmative,  but  further  inquiry  fre- 
quently reveals  the  fact  that  there  is  no  real  budget  system  of  an 
adequate  type.  In  the  first  place,  a  budget  system  should  provide 
for  two  kinds  of.  budgets.  There  must  be  a  budget  of  requests  to 
the  power  supplying  the  funds,  and  after  the  appropriations  are 
made  there  must  be  for  each  year  a  budget  for  the  guidance  of 
operations  during  the  year.  The  former  may  be  called  the 
"original,  or  tentative,  budget,"  and  the  latter  may  be  called  the 
" working  budget."  The  two  may,  of  course,  be  quite  different. 
When  incomplete  budget  systems  are  found,  usually  there  is  no 
tentative  budget.  In  such  cases  appropriations  are  solicited  in 
lump  sums,  the  effort  being  made  to  secure  amounts  as  large  as 
possible,  and  after  these  are  secured  they  are  distributed  in  a 
so-called  budget  of  expenditure.  This  reverses  the  logical  order  of 
the  three  steps  as  stated  in  the  opening  paragraph  of  the  first 
chapter.  In  such  cases  the  distribution  of  funds  for  expenditure 
is  made  more  or  less  arbitrarily  by  the  president,  and  this  is  par- 
ticularly true  where  this  official  has  held  office  for  many  years.  Such 
executives  are  usually  strong  advocates  of  freedom  in  administration 
and  dread  nothing  so  much  as  a  change  in  business  procedure. 

G.      CONCLUSIONS  AND  RECOMMENDATIONS 

From  the  data  presented  in  this  chapter,  the  following  con- 
clusions and  recommendations  appear  to  be  justified: 

i.  Among  the  officials  in  charge  of  business  administration  at 
the  various  institutions  there  is  little  uniformity  of  title;  and  it  is 
suggested  that  a  greater  uniformity  is  desirable  and  could  be  easily 
had  by  dropping  the  unusual  titles  and  confining  the  designations 
to  such  titles  as  " business  manager"  and  "comptroller." 

2  The  last  sentence  of  Section  D,  all  of  Section  E,  and  the  greater  portion  of 
Section  F  may  be  found  on  pages  13-18  of  typewritten  manuscript. 


io        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

2.  The  president  of  the  institution  is  always  supreme  in  author- 
ity over  the  finances  within  the  interior  organization  of  the  college, 
and  this  supremacy  differs  only  in  degree;   and  this  definite  place- 
ment of  authority  is  wise. 

3.  A  budget  system  is  comparatively  new  at  most  colleges, 
and  at  some  it  is  still  comparatively  unknown;  and  it  is  suggested 
that  all  college  officials  should  familiarize  themselves  with  the 
general  plan  and  purpose  of  the  budget  and  with  such  details  as 
appear  necessary. 

4.  Previous  to  the  introduction  of  a  budget  system,  requests 
for  funds  are  made  in  a  non-scientific  and  unbusiness-like  manner, 
the  practice  being  to  ask  for  large  lump  sums  for  general  use,  and 
to  decide  after  the  appropriations  are  made  as  to  how  they  shall  be 
expended;  and  it  is  recommended  that  instead  of  this  the  objectives 
be  set,  the  means  be  determined,  and  then  the  cost  be  estimated, 
the  requests  to  be  based  strictly  on  these  estimates. 

5.  There  is  evident  satisfaction  with  existing  systems,  both 
budget  and  non-budget,  in  the  colleges,  but  in  the  latter  case  it  is 
usually  the  result  of  antipathy  to  change;  and  inasmuch  as  budget 
systems  have  proved  beyond  question  their  value,  it  is  recommended 
that  changes  in  administrative  personnel  be  effected  where  present 
officials  refuse  to  instal  budgets  for  no  better  reason  than  satisfaction 
with  the  present  methods. 

6.  Throughout  the  states  there  is  a  noticeable  tendency  to 
centralize  the  administration  of  the  public  finances;    and  this  is 
wise  provided  it  does  not  lead  to  restrictions  on  colleges  in  such 
a  way  as  to  lessen  efficiency. 

7.  Where  budget  systems  are  established  it  is  usual  to  find  some 
intermediary  authority  between  the  college  and  the  legislature, 
which  reviews  the  requests  and  makes  recommendations;   and  this 
has  advantages  provided  the  institution  is  given  full  opportunity 
to  present  its  claims  and  has  the  right  of  appeal  to  the  legislature. 


CHAPTER  III 
GENERAL  ADMINISTRATION  OF  FINANCES 

I.1      CONCLUSIONS   AND   RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  general 
administration  of  finances  appear  to  justify  the  following  con- 
clusions and  recommendations: 

1.  There  is  now  little  difficulty  in  meeting  the  federal  require- 
ments;  and  each  participating  institution  should  be  held  strictly 
to  the  spirit  as  well  as  to  the  letter  of  the  law  under  which  the 
federal  funds  are  granted. 

2.  A  comparatively  small  part  of  the  income  of  these  institutions 
now   comes   from   federal   sources;    and   these   funds   should   be 
segregated  to  the  special  causes  for  which  they  are  intended. 

3.  The  federal  report  is  a  valuable  step  in  the  direction  of 
uniform  reporting  to  the  end  that  comparable  data  may  be  avail- 
able;  and  this  report  should  be  made  with  discriminating  care  by 
all  the  colleges. 

4.  The  present  tendency  in  the  administration  of  state  finance 
is  decidedly  toward  the  state  budget  system;   and  it  is  advisable 
to  encourage  the  inauguration  of  such  a  system  in  every  state. 

5.  The  present  tendency  in  the  administration  of  the  finances 
of  state-supported  institutions  is  toward  prescription  from  without 
the  institution;    and  this  is  not  undesirable  provided  it  does  not 
extend  so  far  as  to  restrict  the  progress  of  the  institution  and 
deaden  initiative. 

6.  Educational  institutions  are  usually  differentiated  from  other 
institutions,  departments,  and  agencies  of  the  state  in  the  budget 
system;    and  it  is  desirable   that  provision  be  made  for   such 
differentiation  at  least  in  the  classifications. 

7.  Most  college  officials  prefer  to  be  unrestricted,  or  restricted 
as  little  as  possible,  in  the  administration  of  the  finances  of  their 
institutions;   and  they  should  be  restricted  only  so  far  as  may  be 

1  Sections  A-H  may  be  found  on  pages  21-37  of  typewritten  manuscript. 


12        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

necessary  to  secure  a  reasonable  degree  of  uniformity,  systematic 
attention  to  business,  and  integrity  and  efficiency  in  administration. 

8.  The  favorite  plan  in  state  budget  systems  is  for  the  governor 
to  be  the  chief  budget  officer,  assisted  by  an  advisory  board  includ- 
ing the  chairmen  of  the  committees  in  charge  of  appropriations  in 
the  two  houses  of  the  legislature;  and  this  should  be  a  good  organi- 
zation, provided  the   colleges   are  given  ample   opportunity   to 
present  their  claims  and  are  treated  impartially  and  without  ref- 
erence to  political  considerations. 

9.  A  mill  tax  for  the  support  of  the  state  college  is  desirable  for 
its  stabilizing  effect,  enabling  the  authorities  to  plan  considerably 
in  advance  with  the  assurance  that  the  plans  are  possible  of  reali- 
zation within  a  definite  period,  and  in  a  measure  protecting  the 
institution  from  the  caprices  of  legislative  bodies;  and  this  plan  for 
supplying  funds  should  be  adopted  in  all  states  except  where 
extraordinary  conditions  may  make  it  inexpedient. 

10.  In  some  of  the  state  budget  systems  an  emergency  fund  is 
provided  in  addition  to  the  amounts  specifically  appropriated ;  and 
this  is  desirable  for  protection,  provided  it  is  carefully,  intelligently, 
and  impartially  administered. 

11.  A  few  states  have  a  civil-service  system  for  the  selection  of 
certain  grades  of  employees;  but  this  is  not  satisfactory  in  meeting 
the  peculiar  needs  of  colleges  and  should  not  be  forced  upon  them. 

12.  About  two- thirds  of  the  colleges  plan  ahead  and  request 
liberal  appropriations  for  development,  while  the  other  one- third 
appear  to  be  restricted  in  their  outlook  and  effort;   and  it  seems 
desirable  that  the  latter  seek  a  clear  defining  of  objectives  and 
proceed  without  delay  in  making  their  plans  accordingly,  and 
where  this  is  not  possible  with  the  officials  now  in  charge  there 
should  be  such  a  reorganization  as  may  be  necessary  to  put  the 
institution  on  an  efficient  and  forward-looking  basis. 

13.  Where  there  are  no  state  budget  systems  and  in  some  cases 
where  there  are  such  systems,  it  appears  customary  for  institutions 
to  request  legislatures  to  appropriate  much  more  than  can  be 
reasonably  expected  or  than  is  enough  to  cover  the  actual  needs, 
under  the  assumption  that  the  amounts  requested  will  be  pruned; 
but  it  is  desirable  to  discourage  this  by  formulating  the  budget  on 


GENERAL  ADMINISTRATION  OF  FINANCES  13 

a  basis  of  accurate  estimates  to  meet  well-recognized  needs  for 
present  essentials  and  for  developments  clearly  called  for  by  the 
future. 

14.  In  some  states  there  appears  to  be  too  much  administrative 
machinery  without  the  institution  for  the  management  of  its  busi- 
ness affairs;   and  it  is  desirable  that  such  an  outside  organization 
as  may  be  necessary  be  simple  and  direct. 

15.  Within  their  own  organization  some  institutions  have  an 
elaborate  provision  for  the  handling  of  business  affairs,  while  others 
have  too  little;  and  it  is  desirable  to  avoid  extremes,  and  to  provide 
such  an  organization  as  will  definitely  place  responsibility  and 
secure  the  prompt  and  efficient  transaction  of  all  college  business, 
which  usually  calls  for  the  proper  performance  of  the  three  principal 
functions  of:    (a)  collecting  and  disbursing  funds;    (b)  auditing, 
accounting,  and  controlling;    and   (c)  purchasing  and  handling 
commodities. 


CHAPTER  IV 
THE  ORIGINAL,  OR  TENTATIVE,  BUDGET 

A.      DEFINITION  AND  RELATIONSHIP 

In  the  complete  budget  system  of  a  college  there  are  two  budgets, 
namely,  (i)  the  original,  or  tentative,  budget  of  requests  to  be 
presented  to  the  support-supplying  power,  and  (2)  the  final,  or 
working,  budget  of  allotments  to  the  several  departments  and 
divisions  of  the  institution  for  expenditure,  after  the  income  of  the 
institution  is  definitely  known.  The  first  presumably  represents 
what  each  department  and  division  of  an  institution  estimates  its 
needs  to  be  for  the  ensuing  budget  period,  while  the  latter  represents 
the  best  possible  distribution  of  the  available  income  to  meet  those 
needs.  Since  the  original  budget  is  formulated  before  it  is  defi- 
nitely known  what  the  revenues  of  the  institution  will  be,  it  must 
be  purely  tentative.  After  the  appropriations  are  made  and  the 
income  is  pretty  definitely  determined  for  the  budget  period,  then 
the  original  budget  may  be  revised  accordingly,  in  which  case  it  is 
converted  into  a  working  budget.  The  original  budget  is  usually 
made  to  cover  a  biennial  period,  since  most  legislatures  meet  in 
alternate  years;  but  the  working  budget  is  usually  made  annually, 
since  it  is  possible  to  estimate  actual  needs  for  a  year  with  greater 
certainty  than  to  estimate  them  for  two  years  in  advance. 

State  budget  systems  are  usually  concerned  chiefly,  if  not 
entirely,  with  the  budget  of  requests,  and  this  is  what  goes  to  the 
budget  authorities  outside  of  the  institution.  A  properly  made 
budget  of  requests  gives  much  information,  of  a  definite  and 
analytical  character,  to  the  appropriating  authorities  and  also  to 
the  public. 

On  the  other  hand,  the  working  budget  usually  concerns  only 
the  interior  organization  of  the  college.  It  analyzes  the  work  of 
the  entire  organization,  all  its  activities  and  departments,  and 
provides  a  working  plan  for  the  period  covered,  which  is  usually 
one  year.  If  the  tentative  budget  has  been  carefully  prepared  in 

14 


THE  ORIGINAL,  OR  TENTATIVE,  BUDGET  15 

the  various  divisions,  and  if  the  income  proves  to  be  what  has  been 
estimated  and  requested,  or  approximately  so,  then  the  working 
budget  may  be  made  by  revising  as  far  as  may  be  necessary  the 
tentative  budget.  When  there  is  great  difference  a  new  budget 
must  be  prepared.  In  every  case  the  original  budget  is  merely 
preliminary  to  the  final  budget,  and  is  made  up  purely  of  estimates, 
the  fulfilment  of  which  is  dependent  upon  the  appropriations 
received.  These  estimates  are  usually  based  upon  the  actual 
expenditures  of  a  preceding  period,  varying  in  different  states  from 
one  to  four  years. 

In  can  never  be  expected  that  the  amounts  in  either  the  tenta- 
tive budget  or  the  working  budget  will  be  altogether  accurate. 
Officials  who  are  experienced  in  such  matters  can  estimate  quite 
closely,  but  only  in  the  case  of  fixed  charges  can  the  amounts  be 
exact.  The  estimates  of  the  tentative  budget  are  less  apt  to  be 
accurate  than  those  of  the  working  budget,  for  obvious  reasons. 
Compared  to  the  former  custom  of  asking  for  appropriations  in 
large  lump  sums  for  general  purposes,  the  budget-estimate  method 
is  a  great  advance  toward  accuracy. 

J.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  original,  or 
tentative,  budget  appear  to  justify  the  following  conclusions  and 
recommendations : 

1.  The  tentative  budget  is  a  valuable  means  of  analysis  for 
presenting  the  activities  and  needs  of  a  college  to  the  legislature 
and  people  of  the  state,  and  represents  a  decided  advance  over  the 
usual  lump-sum  method  of  requesting  appropriations;    and  it  is 
recommended  that  the  budget  system  be  introduced  at  all  state 
colleges. 

2.  The  time  used  in  formulating  the  budget  varies,  but  it  is 
desirable  to  have  a  definite  time  fixed  at  each  institution;   and  it 
is  recommended  that  at  least  six  months  be  allowed. 

3.  The  president  of  the  college  usually  has  the  chief  part  in 
deciding  what  amounts  shall  be  included  in  the  budget;   but  it  is 
recommended  that  faculty  co-operation  be  secured  as  far  as  practi- 
cable, particularly  through  deans  and  heads  of  departments. 

1  Sections  B-I  may  be  found  on  pages  43-72  of  typewritten  manuscript. 


1 6        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

4.  Not  more  than  one-half  of  the  colleges  appear  to  have  an 
adequate  vision  for  future  development  together  with  the  courage 
to  ask  for  appropriations  to  carry  forward  a  plan  of  progressive 
development;    and  it  is  suggested  that  while  requests  should  be 
based  upon  both  what  the  institution  has  done  and  what  it  needs 
to  do  to  meet  its  opportunities  the  latter  should  predominate,  the 
aim  being  to  promote  a  conservative  progress  continuously. 

5.  It  is  not  customary  for  the  president  to  keep  records  of  the 
conferences  with  deans  and  others  concerning  the  budget;   and  it 
is  suggested  that  it  would  be  wise  to  record  these  and  all  changes 
made  in  the  budget  requests  with  reasons  therefor. 

6.  Although  it  is  customary  to  supply  information  concerning 
the  contents  of  the  budget  to  members  of  the  staff  who  are  inter- 
ested, it  is  recommended  that  there  be  a  definite  plan  for  supplying 
such  information  at  the  various  stages  of  progress  of  the  budget  to 
those  who  made  the  original  estimates. 

7.  In  most  cases  trustees  are  not  supplied  with  copies  of  the 
budget  prior  to  the  meeting  at  which  it  is  to  be  considered;  and  it 
is  recommended  that  the  budget  be  supplied  them  at  least  two 
weeks  in  advance  of  the  meeting. 

8.  The  budget  is  often  arranged  in  parallel  columns  to  show 
increases  and  decreases  as  compared  to  expenditures  during  the 
first  year  of  the  current  biennium;    but  it  is  recommended  that, 
particularly  in  the  case  of  personal  services,  the  comparison  be  made 
with  the  second  year  of  the  biennium  preceding  the  period  covered 
by  the  budget. 

9.  Increases  and  decreases  are  usually  not  totaled  separately 
and  facts  are  hid  in  balances;    and  it  is  recommended  that  such 
columns  be  totaled  separately  and  that  full  explanations  be  included 
for  the  increases  and  decreases. 

10.  Original  requests  from  departments  are  usually  not  shown 
in  the  budget  when  it  reaches  the  trustees;  and  it  is  recommended 
that  they  be  either  shown  or  called  to  the  attention  of  the  trustees 
in  their  original  form,  when  there  are  essential  differences. 

11.  In  a  majority  of  cases  trustees  give  comparatively  little 
time  to  the  consideration  of  the  budget;  but  in  view  of  its  funda- 
mental importance  it  is  suggested  that  ample  time  should  always 
be  taken  for  careful  consideration. 


THE  ORIGINAL,  OR  TENTATIVE,  BUDGET  17 

12.  The  undesirable  method  of  lobbying  for  appropriations  is 
still  followed  in  some  states;    and  it  is  recommended  that  such 
states  adopt  and  extend  budget  systems  in  such  a  manner  as  to 
make  it  unnecessary. 

13.  It  is  customary  in  state  budget  systems  that  some  inter- 
mediary review  and  make  recommendations  on  the  college  budget, 
and  while  it  appears  that  the  institutional  authorities  are  given 
ample  opportunity  to  present  their  claims,  it  is  suggested  that 
every  precaution   should   be  taken  to  prevent  the  entrance  of 
political  considerations  and  also  to  prevent  arbitrary  action. 

14.  In  complete  state  budget  systems  it  is  customary  to  combine 
all  budgets  from  institutions,  departments,  and  agencies  into  one 
general  budget  before  it  reaches  the  legislature,  the  appropriations 
being  later  carried  in  one  general  appropriation  bill;    and  this 
practice  is  recommended  as  desirable  since  it  brings  all  information 
concerning  the  revenues  and  obligations  of  the  state  into  one 
compact  form,  enabling  studies  and  comparisons  to  be  made. 

15.  Usually  when  the  budget  reaches  the  legislature  it  shows 
the  original  amounts  requested  by  the  institution;    and  this  is 
recommended  as  advisable. 

1 6.  While  there  seems  to  be  little  doubt  that  an  institution  has 
the  right  to  appeal  from  the  recommendations  of  the  intermediary 
agency  to  the  legislature,  this  has  been  rarely  done;    and  it  is 
recommended  that  it  be  done  when  the  conditions  appear  to  justify. 

17.  In  most  states  there  has  been  little  rivalry  among  institu- 
tions for  appropriations;   and  the  budget  system  is  recommended 
as  tending  to  reduce  unwholesome  competition  for  funds. 

1 8.  The  budget  is  the  nearest  approach  yet  made  by  legislatures 
to  a  scientific  basis  for  the  distribution  of  funds;   and  it  is  recom- 
mended that  all  states  establish  such  systems,  as  productive  of 
economy  and  efficiency  in  managing  the  state's  finances. 

19.  No  institution  keeps  an  accurate  record  of  the  amounts 
requested  and  the  amounts  granted  through  a  period  of  years; 
and  it  is  recommended  that  this  be  done  as  a  guide  in  making  future 
requests  and  following  budgets  through  their  course. 

20.  Self-satisfaction  is  apparent  everywhere,  and  usually  there 
is  no  desire  for  changes;   and  it  is  recommended  that  state  budget 
systems  are  desirable  as  being  in  some  cases  the  only  method  by 


l8         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

which  the  proper  degree  of  economy  and  efficiency  may  be  obtained 
in  business  management. 

21.  The  chief  support  of  institutions  of  this  type  must  come 
from  the  state;  and  it  is  suggested  that  it  is  not  only  advisable  to 
extend  the  service  of  the  institution  to  all  sections  of  the  state, 
but  also  to  set  forth  clearly  the  objectives,  activities,  and  needs  of 
the  institution  in  analytical  form  as  required  by  the  budget. 

22.  While  the  federal  funds  for  the  land-grant  colleges  of  the 
entire  country  amount  to  six  millions  of  dollars  annually,  this  form 
of  support  goes  but  a  little  way  toward  meeting  the  total  require- 
ments of  these  institutions;   and  it  is  suggested  that  little  should 
be  expected  in  the  way  of  additional  support  from  this  source  for 
instructional  purposes,  because  the  best  service  which  the  federal 
government  can  render  is  probably  in  financing  experimental  and 
research  work. 

23.  Many  institutions  have  found  their  current  incomes  inade- 
quate under  present  economic  conditions;    and  one  useful  func- 
tion of  the  budget  should  be  to  make  it  clear  to  the  people  of  the 
state  that  increased  support  is  necessary. 

24.  Where  there  is  a  mill  tax  the  college  has  a  great  advantage 
even  though  the  proceeds  meet  only  a  portion  of  the  costs  of  opera- 
tion; and  it  is  recommended  that  this  certain  means  of  support  be 
secured  wherever  possible. 

25.  Budget  forms  now  in  use  vary  considerably  in  content  and 
manner  of  presenting  facts,  but  the  essentials  are  the  same,  it  being 
required  that  both  income  and  expenditure  be  set  forth  in  analytical 
form  and  compared  with  at  least  one  year  of  the  preceding  bien- 
nium,  and  that  increases  and  decreases  be  shown  and  explained; 
and  it  is  recommended  that  such  forms  be  made  as  compact  and 
easy  to  follow  as  possible,  after  the  order  of  the  form  used  at 
Minnesota. 


CHAPTER  V 
THE  FINAL,  OR  WORKING,  BUDGET 

A.      DEFINITION  AND   RELATIONSHIP 

The  final,  or  working,  budget,  as  explained  in  the  preceding 
chapter,  is  one  of  the  principal  parts  of  the  budget  system  as  applied 
to  colleges.  After  the  budget  of  requests  has  been  finally  disposed 
of  by  the  legislature  and  the  appropriations  have  been  made,  then 
comes  the  working  budget  as  a  plan  for  the  expenditure  of  the 
available  revenue  during  the  year.  It  may  be  the  tentative  budget 
revised  in  accordance  with  the  action  of  the  legislature,  or  it  may 
be  an  entirely  new  budget. 

The  importance  of  the  working  budget  can  scarcely  be  over- 
emphasized. The  necessity  for  something  of  the  sort  is  so  apparent 
that  institutions  where  there  is  no  real  budget  system  frequently 
have  a  working  budget,  in  one  form  or  another.  It  bears  the  same 
relationship  to  the  operations  of  the  year  as  the  working  plans  for 
a  building  bear  to  the  construction  of  that  building.  The  complete 
working  budget  may  be  looked  upon  as  a  guidebook  to  all  the 
activities  of  the  college,  setting  forth  their  relative  importance  in 
terms  of  money  and  their  relationship  to  one  another.  It  presents 
in  a  more  effective  way  than  that  afforded  by  any  other  device  an 
analysis  of  the  entire  organization  and  work  of  the  institution,  and 
it  gives  one  a  better  insight  into  the  management,  the  extent  and 
variety  of  its  activities,  and  its  general  efficiency  than  may  be  had 
in  any  other  way. 

So  important  is  the  working  budget  that  it  may  be  considered 
as  the  center  of  the  entire  business  administration  of  the  college. 
The  hopes  of  all  departments  are  embodied  in  it  so  far  as  there  is 
any  possibility  of  their  realization  within  the  period  covered  by  it. 
The  work  of  every  division  and  every  enterprise  at  the  college 
revolves  about  it.  It  merits,  therefore,  the  best  attention  that  can 
be  given  to  it;  and  it  is  not  too  much  to  say  that  the  manner  in 

19 


20        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

which  it  is  worked  out  and  followed  is  an  index  to  the  efficiency  of 
the  institution. 

K..1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  working  budget 
appear  to  justify  the  following  conclusions  and  recommendations: 

1.  Practically  every  college  claims  to  have  a  working  budget, 
but  there  is  great  difference  in  its  completeness;  and,  since  it  is  the 
center  of  the  financial  administration  of  an  institution,  it  is  recom- 
mended that  it  be  given  most  careful  consideration  and  be  made  as 
complete  as  necessary  to  cover  every  activity  and  financial  interest. 

2.  Regardless  of  the  classifications  of  the  state  budget  system 
the  appropriations  are  usually  made  by  legislatures  in  a  few  large 
amounts,  giving  the  college  authorities  latitude  in  adjusting  the 
distribution  to  suit  current  needs;    and  this  is  recommended  as 
desirable  practice. 

3.  While  a  few  of  the  colleges  studied  have  the  disposal  of  the 
funds  collected  by  them  from  various  sources  other  than  state 
appropriations  and  federal  grants,  the  tendency  is  to  require  that 
all  such  receipts  be  reported  in  budget  revenue  estimates  and  be 
reappropriated ;   and  this  system  is  not  objectionable  provided  it 
does  not  impair  the  efficiency  of  the  institution  in  any  way,  it  being 
specifically  recommended  that  revenue  produced  by  any  given 
department  be  set  apart  entirely  for  the  benefit  of  that  department. 

4.  The  most  common  legal  restriction  refers  to  the  exceeding 
of  amounts  appropriated,  but  this  is  not  enforced  in  many  cases; 
and  it  is  recommended  as  being  the  safest  policy  not  to  exceed 
amounts  appropriated  except  where  there  is  an  emergency  fund. 

5.  Borrowing  funds  or  using  budget  allowances  prematurely 
should  not  usually  be  necessary  in  a  well-managed  budget  system; 
but,  since  it  has  to  be  resorted  to  occasionally  for  good  reasons, 
it  is  recommended  that  there  be  no  restrictions  against  such  practice 
provided  there  is  assurance  that  there  will  later  be  sufficient  funds 
to  cover. 

6.  Many  institutions  allow  deficits  to  accumulate,  with  a  view 
to  asking  the  legislature  to  appropriate  funds  to  cover;  but  this  is 

1  Sections  B-J  may  be  found  on  pages  79-106  of  typewritten  manuscript. 


THE  FINAL,  OR  WORKING,  BUDGET  21 

not  good  business  practice,  is  not  in  accord  with  the  principles  of 
the  budget  system,  and  should  be  permitted  only  under  extreme 
circumstances. 

7.  Usually  by  state  law  unused  portions  of  state  appropriations 
lapse  into  the  state  treasury  at  the  close  of  the  budget  period; 
but  this  is  seldom  permitted  to  happen,  and  when  it  does  occur  it  is 
probably  evidence  of  inefficient  management;   and,  in  such  cases, 
it  is  recommended  that  steps  be  taken  to  remove  the  inefficiency. 

8.  Few  land-grant  colleges  have  endowment  funds  or  funds  in 
hand  not  needed  for  immediate  expenditure,  but  there  is  no  legal 
restriction  to  be  found  concerning  such  funds;    and  it  is  recom- 
mended that  the  greatest  freedom  be  allowed  institutions  having 
them,  provided  the  proper  report  be  made  to  the  public  concerning 
them. 

9.  Practice  varies  in  different  states  as  to  how  the  funds  appro- 
priated by  the  state  may  be  drawn  by  the  college;  and  it  is  desirable 
that  such  funds  be  made  available  to  the  institution  at  such  times 
and  in  such  amounts  as  will  enable  it  to  meet  its   obligations 
promptly. 

10.  The  working  budget  is  usually  prepared  immediately  after 
the  appropriations  are  made  by  the  legislature;  and  it  is  desirable 
that  this  be  done,  if  possible,  before  the  opening  of  the  fiscal  year 
to  which  it  applies. 

11.  The  working  budget  sometimes  has  a  complete  and  detailed 
classification,  serving  as  an  analysis  of  the  entire  work  and  organiza- 
tion of  the  institution;   and  this  type  of  budget  is  recommended 
as  valuable  for  all  institutions. 

12.  In  practically  all  cases  the  president  decides  as  to  the 
allocation  of  funds  to  the  various  departments,  and  in  most  cases 
this  is  done  in  co-operation  with  the  deans  and  heads  of  depart- 
ments;  and  it  is  recommended  that  members  of  the  staff  be  given 
as  large  a  share  as  practicable  in  the  distribution  of  funds. 

13.  In  something  over  one-half  of  the  cases  the  trustees  or  some 
authority  corresponding  to  them  must  approve  the  working  budget, 
and  in  the  other  cases  the  president's  approval  is  sufficient,  but 
where  the  former  is  the  case  it  is  rare  that  changes  are  made;  and 
it  is  recommended  that  the  distribution  in  the  working  budget  be 


22        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

left  largely,  if  not  altogether,  to  the  president  and  his  associates 
within  the  institutional  organization,  since  they  are  closer  to  the 
needs  to  be  met. 

14.  In  a  majority  of  colleges  the  heads  of  departments  are 
formally  notified  of  the  amounts  carried  in  the  working  budget  for 
their  respective  departments;  and  it  is  recommended  that  this  be 
done  in  all  colleges. 

15.  After  notification  of  the  amounts  carried  in  the  working 
budget  for  them,  the  departments  are  usually  authorized  to  proceed 
to  expend  not  in  excess  of  the  amounts  allotted;    but  ordinarily 
requisitions  must  go  through  the  regular  channels  to  the  business 
office  and  all  purchasing  must  be  done  by  the  purchasing  agent 
of  the  college;  and  this  is  recommended  as  good  practice. 

1 6.  Where  there  are  complete  budget  systems  the  budget  and 
its  accompanying  records  form  a  valuable  means  of  controlling 
expenditures;   and  it  is  recommended  that  this  be  considered  a 
chief  function  of  the  budget  and  be  made  useful  to  the  greatest 
possible  extent. 

17.  It  is  customary  to  set  up  ledger  accounts  to  correspond  to 
the  classification  of  the  budget,  which  saves  time  and  promotes 
efficiency  in  accounting  and  controlling;    and  it  is  recommended 
that  the  ledgers  be  arranged  according  to  the  budget  classifications 
in  all  cases. 

1 8.  A  majority  of  the  colleges  keep  a  cumulative  control  record, 
and  one-third  of  them  issue  regularly  a  monthly  control  statement 
to  the  various  departments,  but  few  of  these  include  the  outstanding 
obligations  or  incumbrances,  hence  the  balance  shown  is  not  the 
real  net,  or  free,  balance,  and  is  misleading;  and  it  is  recommended 
that  the  outstanding  obligations  be  always  included  in  such  state- 
ments, being  deducted  from  the  balance  in  hand  so  as  to  indicate 
the  actual  free  working  balance. 

19.  There  is  as  a  rule  considerable  flexibility  in  the  working 
budget,  the  president  having  authority  to  make  shifts  in  the 
amounts,  and  usually  the  heads  of  departments  being  authorized 
to  do  this  within  the  totals  allotted  to  their  departments;  and  it 
is  recommended  that  such  freedom  is  desirable,  and  that  a  reserve  be 
provided  for  the  use  of  the  president  in  meeting  emergencies. 


THE  FINAL,  OR  WORKING,  BUDGET  23 

20.  Few  institutions  keep  a  formal  and  complete  record  of 
changes  made  in  the  working  budget;  and  it  is  recommended  that 
such  a  record  be  kept  continuously  throughout  the  year  for  use  in 
making  up  the  budget  of  the  ensuing  year. 

21.  Promises  concerning  the  budget  made  to  heads  of  depart- 
ments and  others  appear  to  be  seldom  recorded;  and  it  is  recom- 
mended that  this  always  be  done  promptly  through  confirmatory 
letters  or  memoranda  of  which  copies  are  filed  in  the  office  of  the 
official  making  the  promise. 

22.  There  is  apparently  much  self-satisfaction  concerning  the 
working  budget  systems  now  in  effect  at  the  colleges  visited,  and 
comparatively  little  knowledge  of  what  other  institutions  are  doing 
in  this  direction;  and  it  is  recommended  that  the  business  officials 
of  every  institution  study  the  methods  in  use  at  other  institutions 
with  a  view  to  possible  improvements  in  their  own  methods. 

23.  The  essential  forms  in  connection  with  the  working  budget 
are:   (a)  a  budget  request  form,  (b)  a  control  ledger  form,  and  (c) 
a  monthly  control  statement  form;  and  the  budget,  if  printed,  will 
serve  to  inform  the  departments  of  their  apportionments;  and  it 
is  recommended  that  a  full  set  of  such  forms  be  devised  to  meet 
the  needs  at  each  institution. 


CHAPTER  VI 
BUDGET  FORMS  AND  CLASSIFICATIONS 

A.      IMPORTANCE  AND  DIFFICULTIES   OF  CLASSIFICATION 

The  usefulness  of  a  budget  system  depends  largely  upon  its 
classification.  The  chief  purpose  of  a  budget  is  to  present  an 
analysis  of  the  business  of  the  institution,  and  this  is  done  by  means 
of  the  classification  of  items  of  income  and  expenditure.  It  is, 
then,  a  most  important  feature  of  every  budget,  and  one  of 
the  most  difficult.  The  difficulty  of  deciding  upon  a  suitable 
classification  is  recognized  in  accounting  in  general;  and  it  may 
hardly  be  said  that  any  classification  is  ever  all  that  might  be 
desired. 

It  is  easy  to  run  into  extremes  in  devising  classifications. 
Some  are  so  general  and  are  confined  to  such  a  few  items  that 
they  are  altogether  inadequate  as  an  analysis,  while  others  are  so 
detailed  and  contain  so  many  items  that  it  is  most  difficult  to  oper- 
ate the  accounting.  Where  the  items  are  too  few,  one  fails  to  find 
what  he  wants  without  laborious  selection,  possibly  from  original 
vouchers;  and  when  the  items  are  too  numerous,  the  accountant 
is  often  in  doubt  and  spends  much  time  in  making  decisions  as 
between  two  accounts  either  of  which  would  probably  serve  the 
purpose  as  well  as  the  other.  One  must  seek  a  mean  between 
these  extremes  which  will  give  all  the  analysis  needed  for  the  pur- 
poses of  the  institution  and  at  the  same  time  not  be  wasteful  of  the 
time  of  the  accounting  force. 

In  passing  on  the  fitness  of  any  particular  classification,  the  end 
and  purpose  for  which  it  is  made  must  be  the  criterion.  It  is  always 
the  purpose  of  a  classification  to  provide  summaries  for  use  in 
reporting  and  studying  financial  facts,  and  usually  these  summaries 
lead  up  to  the  balance  sheet.  The  classification  should  be  deter- 
mined by  common-sense  requirements,  and  should  carry  titles  which 
clearly  indicate  the  purposes  for  which  the  accounts  are  intended, 
and  therefore  needing  little  explanation. 

24 


BUDGET  FORMS  AND  CLASSIFICATIONS  25 

There  is  no  more  important  feature  of  accounting  than  the 
correct  classification  of  accounts.  It  is  necessary  that  every  trans- 
action find  its  right  place  in  the  records.  Before  a  transaction  is 
recorded,  an  accurate  analysis  must  be  made  of  it  to  determine  the 
main  group  of  accounts  to  which  it  belongs,  and  after  this  further 
analysis  must  be  made  to  fit  it  into  its  proper  place  under  an  account 
title  in  the  main  group. 

In  the  case  of  most  educational  institutions  the  fault  is  to  be 
found  with  the  general  type  of  the  classification  rather  than  with 
too  much  detail.  Some  budgets  fail  to  present  an  analysis  of  the 
business  of  the  institution  because  they  carry  so  few  items  that 
there  is  little  real  classification.  The  tendency  to  err  is  decidedly 
in  this  direction  rather  than  in  that  of  presenting  too  much  detail. 
This  will  appear  from  the  specimen  classifications  included  in  this 
chapter. 

J.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  budget  forms 
and  classifications  appear  to  justify  the  following  conclusions  and 
recommendations : 

1.  In  most  cases  the  three  main  divisions  of  the  land-grant 
college — resident  instruction,  agricultural  research,  and  extension 
service — are  treated  in  separate  budgets;   and  it  is  recommended 
that  this  be  done  in  the  interest  of  good  accounting  and  to  prevent 
misunderstanding  as  to  the  uses  to  which  appropriations  are  put. 

2.  Most  of  the  colleges  include  no  item  for  research  other  than 
the  provision  made  for  the  agricultural  experiment  station,  and 
where  there  is  an  engineering  experiment  station  or  where  research 
is  done  in  other  divisions,  such  provision  as  is  made  is  included  in 
other  items;  but  it  is  recommended  that,  in  view  of  the  importance 
of  research  in  the  lines  represented  in  colleges  of  this  type,  definite 
amounts  be  set  apart  for  research. 

3.  A  majority  of  the  institutions  maintain  some  sort  of  special 
budget  in  addition  to  the  main  college  budget;  but  in  the  interest 
of  system  it  is  desirable  to  include  all  activities  and  functions  in  one 
general  budget;   and  where  separate  budgets  must  be  carried  it  is 

1  Sections  B-I  may  be  found  on  pages  113-34  of  typewritten  manuscript. 


26        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

recommended  that  their  classifications  conform  to  the  classification 
of  the  main  budget. 

4.  In  most  cases  income  and  expense  in  each  main  division  are 
kept  strictly  apart  from  the  other  divisions  in  the  accounting;  and 
it  is  recommended  that  this  be  done  even  though  the  funds  are 
actually  deposited  together  in  one  account. 

5.  Income  from  all  sources  is  usually  put  together  in  the  income 
budget,  but  each  fund  is  shown  separately,  particular  care  being 
exercised  in  regard  to  the  federal  funds;  and  it  is  recommended  that 
this  be  done  and  that  the  practice  be  as  carefully  followed  with 
state  funds  as  with  federal  funds. 

6.  It  is  customary  to  segregate  capital  outlay  from  operation 
and  maintenance  expenses;    and  it  is  recommended  that  this  be 
always  done,  since  the  former  adds  to  the  permanent  assets  of  the 
institution  and  indicates  development. 

7.  While  most  of  the  classifications  at  these  colleges  are  simple 
and  brief,  and  while  these  are  desirable  qualities  in  all  systems, 
care  must  be  taken  that  budgets  are  sufficiently  analytical  to  supply 
the  information  desired  of  them  economically  and  accurately;  and 
to  this  end  it  is  recommended  that  budgets  be  classified  by  (a)  func- 
tion (b)  character  of  expenditure — operation  and  outlay  (c)  object 
of  expenditure  and  (d)  such  subheads  under  the  last  named  as  may 
be  advisable,  useless  detail  being  avoided. 

8.  Recognizing  the  difficulty  of  securing  a  properly  uniform 
interpretation  of  the  budget  classification,  some  institutions  have 
all  classifying  done  in  the  central  accounting  office,  while  others 
issue  more  or  less  detailed  instructions;  and  it  is  recommended  that 
the  classifying  be  done  first  in  the  department  where  the  charge 
originates  and  later  checked  for  verification  and  correction  if  neces- 
sary in  the  accounting  department,  in  order  that  the  departments 
may  be  in  better  position  to  control  the  expenditure  of  their  budget 
allotments. 

9.  Practically  nowhere  has  any  attempt  been  made  to  distribute 
the  cost  of  general  utilities  or  overhead  expenses  of  any  kind  among 
the  departments  in  proportion  to  the  benefits  they  receive  from 
them,  and  it  is  generally  considered  by  business  officials  that  the 
results  of  such  efforts  do  not  justify  the  cost  of  making  them,  and 


BUDGET  FORMS  AND  CLASSIFICATIONS  27 

that  it  is  difficult  if  not  impossible  to  find  an  equitable  basis  for 
such  distributions;  but  it  is  suggested  that  the  whole  question  is 
worthy  of  consideration  by  our  best  college  accountants,  and  studies 
in  this  field  should  be  continued. 

10.  In  but  few  cases  have  computations  been  made  to  show  the 
relative  cost  of  heating,  lighting,  etc.,  for  the  various  portions  of  the 
physical  plant;   and  it  is  suggested  that  this  is  feasible  and  might 
lead  to  important  results  in  the  operation  of  present  buildings  and 
in  the  designing  of  new  buildings. 

11.  Most  institutions  have  certain  self-supporting  utilities  ren- 
dering service  for  pay  to  students  and  perhaps  also  to  the  public; 
and  it  is  recommended  that  all  revenue  from  such  activities  be  used 
exclusively  for  the  benefit  of  the  activity  producing  it. 

12.  The  working  budget  should  completely  cover  all  activities 
of  the  institution;  it  should  be  well  arranged,  so  as  to  give  clearness 
and  ease  of  reference;  it  should  have  such  serial  numbers,  symbols, 
and  cross-references  as  will  add  to  convenience  of  use;   it  should 
have  useful  summaries;  if  large  it  should  be  indexed;  it  should  have 
blank  spaces  to  accommodate  changes  during  the  year;    and  it 
should  be  printed  or  mimeographed  in  a  sufficiently  large  edition  to 
supply  all  who  need  it;    and  it  is  recommended  that  institutions 
which  do  not  now  have  such  budgets  make  a  study  of  the  specimens 
presented  in  this  chapter,  and  if  possible  also  of  the  complete 
budgets  from  which  they  are  taken,  or  similar  budgets  to  be  found 
elsewhere,  taking  steps  to  provide  a  suitable  budget  for  their  own 
institutions. 

13.  The  classifications  of  most  institutions  appear  to  contain 
too  few  divisions  to  furnish  a  complete  array  of  facts,  and  the  classi- 
fications of  a  few  institutions  go  to  the  opposite  extreme  and  cause 
a  waste  of  time  with  unnecessary  detail;   and  it  is  recommended 
that  each  institution  seek  to  devise  a  classification  which  will  be 
between  the  extremes,  and  satisfy  all  analytical  needs,  while  at  the 
same  time  capable  of  economical  operation. 

14.  There  appears  to  be  great  self-satisfaction  at  most  institu- 
tions with  regard  to  the  classifications  now  in  use,  but  the  outsider 
has  often  difficulty  in  locating  the  information  he  desires  for  com- 
parative purposes  or  in  obtaining  an  adequate  idea  of  the  activities 


28         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

of  the  institution;  and  it  is  recommended  that  college  officials 
scrutinize  carefully  their  present  classifications  and  compare  them 
with  others,  to  ascertain  whether  they  are  sufficiently  clear  and 
detailed  to  meet  the  reasonable  demands  of  those  without  as  well  as 
of  those  within  the  institution,  making  such  changes  and  additions 
as  may  seem  desirable. 


CHAPTER  VII 
ACCOUNTING  AS  A  BASIS  FOR  BUDGET-MAKING 

A.      PURPOSES   OF  COLLEGE  ACCOUNTING 

It  is  said  that  soon  after  the  Federal  Trade  Commission  began 
its  work  it  discovered  that  more  than  75,000  corporations  in  America 
were  running  at  an  annual  loss,  and  that  three-fourths  of  all  concerns 
engaged  in  trade  and  industry  were  making  smaller  profits  than 
they  normally  should  realize,  largely  because  they  did  not  have 
the  proper  methods  of  accounting  and  cost-finding.  The  Carnegie 
Foundation  for  the  Advancement  of  Teaching,  in  its  Bulletin  No.  3, 
is  authority  for  the  statement  that  "the  great  mass  of  institutions 
of  higher  learning  in  the  United  States  bearing  the  name  college  or 
university  make  no  public  accounting  of  the  disposition  of  the 
moneys  which  they  receive";  and  it  is  fair  to  assume  that  this  is 
largely  due  to  the  fact  that  the  accounts  are  not  kept  as  they  should 
be  to  supply  the  kind  of  information  that  is  desired. 

Accounting  is  record-keeping.  An  account  is  a  record  of  one 
or  more  items,  either  similar  or  dissimilar,  relating  to  the  same 
person  or  thing,  kept  under  an  appropriate  heading.  The  heading, 
or  title,  of  an  account  should  indicate  clearly  the  content  of  the 
account.  Every  business  transaction  at  an  institution  constitutes 
the  reason  and  the  material  for  an  item  to  be  recorded.  Before 
a  transaction  may  be  recorded  it  must  be  analyzed  into  its  elements 
and  classified  in  accordance  with  the  classification  followed  at  the 
institution.  After  it  is  classified  it  is  merely  a  matter  of  recording 
it  in  accordance  with  the  practice  of  good  accounting. 

To  promote  the  efficiency  of  an  institution  it  is  necessary  to  have 
a  wide  knowledge  of  the  existing  facts.  The  most  reliable  method 
of  supplying  such  knowledge  is  through  quantitative  data  afforded 
by  a  complete  and  accurate  system  of  bookkeeping.  The  utility 
and  the  validity  of  data  depend  upon  the  form  and  method  of  col- 
lecting, recording,  and  presenting  them.  While  many  of  the  same 
principles  are  involved,  the  bookkeeping  of  an  educational  institu- 

29 


30        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

tion  is  different  from  that  of  an  industrial  or  commercial  establish- 
ment, but  it  is  in  no  sense  less  important.  The  budgets  of  colleges 
are  mounting  higher  and  higher  in  total  amount  each  year.  It  is 
by  no  means  true  that  the  efficiency  of  an  institution  varies  always 
in  direct  proportion  to  the  amount  of  its  budget. 

The  successful  business  executive,  whether  of  an  industrial 
plant  or  of  an  educational  institution,  must  have  the  data  which 
will  enable  him  to  study  every  phase  of  the  operation  of  his  business, 
and  to  find  out  what  every  service  and  activity  is  costing.  With 
such  information  may  be  answered  the  question  that  is  constantly 
being  raised  as  to  various  projects  being  worth  what  they  cost. 
Without  such  information  the  management  must  be  unscientific 
and  fall  short  of  the  requirements  of  efficiency  and  economy. 

The  function  of  accounting  has  often  been  conceived  of  as  being 
merely  or  largely  a  means  of  insuring  honesty  on  the  part  of  officials 
charged  with  the  responsibility  of  handling  funds,  particularly  public 
funds.  As  an  evidence  of  this  may  be  cited  the  law  which  exists 
in  some  states  requiring  the  entire  list  of  vouchers  issued  at  all 
state  institutions  to  be  printed  in  the  annual  or  biennial  reports. 
But  the  real  function  of  accounting  is  far  more  than  this,  just  as  it 
is  also  far  more  than  mere  bookkeeping,  however  important  the 
latter  may  be.  An  adequate  accounting  system  should  provide 
those  in  authority  with  not  only  an  accurate  gauge  of  the  efficiency 
of  the  various  elements  that  go  to  make  up  the  organization  and 
work  of  the  institution  and  the  cost  of  the  same,  but  also  a  sure 
foundation  for  the  determination  of  future  policies  for  the  institu- 
tion in  all  of  its  divisions.  Expenditures  and  requests  to  cover 
further  expenditures  must  be  justified  by  the  results  accomplished 
and  service  performed.  Accounting  data  as  forming  a  gauge  of 
efficiency  may  be  applied  historically  or  currently.  One  may  study 
the  cost  of  a  given  department  comparatively  through  a  period  of 
years,  and  thus  obtain  valuable  guidance  for  formulating  future 
budgets;  or  one  may  study  costs  in  his  own  institution  in  com- 
parison with  costs  for  like  functions,  services,  and  objects  in  other 
institutions,  and  thus  learn  much  on  which  to  base  his  policies  for 
the  future  as  well  as  much  concerning  the  relative  efficiency  of  his 
own  organization.  But  none  of  this  may  be  done  without  an 


ACCOUNTING  AS  A  BASIS  FOR  BUDGET-MAKING  31 

adequate  accounting  system  to  supply  data  in  complete,  compa- 
rable, and  reliable  form. 

The  system  of  accounting  should  be  as  simple  as  possible  to 
require  the  minimum  expenditure  of  time  and  energy  in  its  applica- 
tion; but  at  the  same  time  it  must  be  adequate  to  supply  all  the 
data  required  by  the  various  officials  of  the  institution,  by  the  state 
and  federal  governments,  and  by  the  interested  public.  It  should 
be  such  as  to  enable  the  interested  person  to  select  those  items  of 
income  and  expense  which  are  most  significant  in  the  operation  of 
the  institution,  and  to  get  an  accurate  conception  of  the  entire 
organization  and  activities  wijh  a  minimum  of  effort. 

So  far  as  budget-making  and  budget-using  are  concerned, 
accounting  lies  at  the  very  foundation  of  both  and  makes  them 
significant  or  worthless. 

K.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  accounting  as  a 
basis  for  budget-making  appear  to  justify  the  following  conclusions 
and  recommendations: 

1.  Comparatively  few  of  the  states  require  a  uniform  system  of 
accounting  to  be  followed;  but  whether  this  be  done  or  not,  it  is 
desirable  that  the  classification  used  in  the  accounting  shall  follow 
the  classification  of  the  budget,  with  perhaps  considerable  detail 
added,  and  it  is  recommended  that  this  be  done. 

2.  Wherever  there  is  a  complete  working  budget  it  is  customary 
to  find  the  ledger  headings  corresponding  exactly  to  the  titles  of 
the  budget;   and  it  is  recommended  that  this  be  done  always,  in 
the  interest  of  economy  of  time  in  comparing  the  records. 

3.  There  is  great  lack  of  uniformity  in  the  fiscal  year  observed 
at  the  different  institutions;  and  it  is  recommended  that  a  uniform 
fiscal  year  be  adopted  throughout  the  United  States  for  all  of  the 
land-grant  colleges  as  soon  as  practicable. 

4.  In  some  cases  the  fiscal  year  does  not  coincide  with  the 
federal  year,  in  some  it  does  not  coincide  with  the  state  appropria- 
tion year,  and  in  some  there  are  other  differences,  all  of  which 
complicate  the  records,  the  financial  reporting,  and  other  features 

1  Sections  B-J  may  be  found  on  pages  142-66  of  typewritten  manuscript. 


32         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

of  the  work,  and  create  an  undesirable  situation;  and  it  is  therefore 
recommended  that  the  fiscal  year  be  made  to  extend  from  July  i 
to  June  30,  which  is  the  federal  year,  which  is  often  the  state  appro- 
priation year,  and  which  is  the  year  usually  followed  by  industrial 
and  commercial  organizations. 

5.  At  practically  all  institutions  the  bookkeeping  is  such  that 
educational  accounts  may  be  segregated  from  non-educational 
accounts  if  desired  for  comparative  or  other  purposes;    and  it  is 
suggested  that  this  should  always  be  the  case,  and  that  in  reporting 
it  would  be  well  to  show  the  relationship  of  the  two  groups  of 
expenditures  through  a  period  of   years,    and   perhaps   also   in 
comparison  with  other  institutions  for  similar  periods. 

6.  Usually  accounts  are  kept  in  such  a  manner  that  the  cost  of 
operating  the  several  departments  may  be  determined;   and  it  is 
recommended  that  this  be  done. 

7.  In  but  few  cases  are  overhead  costs  prorated  among  the 
various  departments;  and  it  is  recommended  that  this  be  done 
as  far  as  practicable  in  all  divisions  of  all  institutions. 

8.  Very  few  institutions  in  the  group  studied  have  made  any 
attempt  at  cost-accounting,  but  studies  made  elswhere  and  now 
under  way  at  one  or  more  colleges  in  the  group  show  that  there  are 
possibilities  in  this  direction;    and  it  is  recommended  that  our 
college  accountants  extend  the  efforts  along  this  line  as  rapidly  as 
practicable. 

9.  In  the  computation  of  costs,  such  as  the  cost  of  instruction 
in  the  various  departments,  it  is  exceedingly  important  that  the 
factors  which  enter  into  the  matter  be  carefully  considered,  particu- 
lar caution  being  necessary  in  using  the  student  unit;  and  it  is 
recommended  that  in  such  computations  appropriate  weights  be 
attached  to  provide  for  differences  in  length  of  attendance,  in  type 
of  work  done,  etc. 

10.  In  such  computations  as  those  just  mentioned  the  instruc- 
tor's load  is  usually  involved,  and  this  must  include  the  extra- 
classroom  load  as  well  as  the  actual  time  devoted  to  teaching;  and 
it  is  recommended  that  care  be  taken  to  get  complete  data  concern- 
ing this  before  the  computations  are  completed. 


ACCOUNTING  AS  A  BASIS  FOR  BUDGET-MAKING  33 

11.  The  cost  of  the  general  business  office  is  seldom  divided 
among  the  departments  of  the  college ;  and  it  is  recommended  that 
this  as  well  as  all  other  overhead  cost  be  divided  as  far  as  may  be 
practicable,  on  an  equitable  basis. 

12.  Some  institutions  have  published  "per  capita  costs"  based 
on  gross  enrolment  and  total  amount  expended  for  operation;  but 
such  statements  are  meaningless  and  misleading,  and  it  is  recom- 
mended that  they  be  discouraged  until  discontinued. 

13.  It  is  apparent  that  the  large  number  of  variable  factors 
involved  in  any  attempt  at  college  cost-accounting  tend  to  invali- 
date the  results  secured;  but  it  is  recommended  as  desirable  that 
efforts  in  this  direction  be  continued,  with  due  caution  as  to  the 
unqualified  acceptance  of  results. 

14.  Accruals  and  balances  where  they  exist  are  usually  shown 
in  the  accounting  and  in  the  reporting;  and  it  is  recommended  that 
this  be  always  done  so  that  it  will  be  clear  how  the  period  begins 
and  how  it  ends. 

15.  Accounts  payable  and  accounts  receivable  are  apparently 
never  included  in  the  college  budget,  although  they  are  sometimes 
shown  in  the  financial  report;  and  it  is  recommended  these  be 
included  in  the  budget,  if  they  are  considerable,  and  also  in  the 
financial  report,  which  should  show  the  names  and  amounts  or 
other  particulars  as  may  be  advisable. 

1 6.  Most  of  the  colleges  have  summer  sessions,  and  in  all  cases 
the  finances  of  the  summer  session  are  handled  independently  in 
the  budget,  and  this  is  desirable  in  so  far  as  there  is  need  to  deter- 
mine the  cost  of  the  summer  session  as  distinct  from  the  regular 
session;   but  the  summer  session  should  be  considered  an  integral 
part  of  the  college  year  and  an  altogether  legitimate  portion  of  the 
college  work,  and  to  this  end  its  operation  should  be  provided  for 
within  the  general  college  budget. 

17.  The  separate  sets  of  books  formerly  found  in  these  colleges 
have  given  way  to  loose-leaf  ledgers  and  other  record  books  contain- 
ing the  bookkeeping  for  all  phases  of  the  work  of  the  institution 
in  what  is  practically  one  set  of  books ;  and  this  practice  is  recom- 
mended as  being  in  accordance  with  modern  business  methods. 


34        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

1 8.  Without  exception  the  colleges  carry  building  costs  and  costs 
of  other  important  permanent  improvements  in  separate  accounts; 
and  it  is  recommended  that  individual   accounts  be  maintained 
for  each  building,  large  land  acquisition,  or  other  important  addition 
to  the  permanent  assets. 

19.  In  but  few  cases  has  any  attempt  been  made  to  compute 
the  cost  of  buildings  per  square  foot  or  per  cubic  foot  or  per  student 
accommodated,  but  the  few  efforts  that  have  been  made  indicate 
that  there  are  possibilities  in  this  direction  the  realization  of  which 
might  prove  valuable  in  the  construction  of  buildings  or  in  estimat- 
ing the  cost  of  same;  and  it  is  recommended  that  officials  in  charge, 
with  perhaps  the  assistance  of  architects,  make  such  calculations. 

20.  That  there  is  great  variance  of  conception  as  to  the  function 
and  scope  of  college  accounting,  with  a  disposition  on  the  part  of 
some  officials  to  do  no  more  than  is  imposed  by  the  federal  govern- 
ment or  state  authorities,  but  the  more  progressive  institutions  are 
recognizing  a  wide  field  for  usefulness  in  accounting  as  affording 
an  analysis  of  the  institution  as  a  basis  for  the  formulation  of  plans 
and  policies;  and  it  is  recommended  that  this  latter  view  be  consid- 
ered the  correct  one  and  that  action  in  accordance  with  it  be 
encouraged. 

21.  The  distribution  ledger  is  the  core  of  the  entire  accounting 
system;  and  it  is  closely  related  to  the  budget;  hence  the  greatest 
care  should  be  taken  to  devise  the  best  possible  form  of  ledger  page 
from  the  standpoint  of  completeness  and  economy  of  operation; 
and  it  is  recommended  that  accounting  officials  make  a  study  of 
the  best  forms  to  be  found  at  the  various  colleges  of  similar  type 
and  adapt  the  most  desirable  features  to  their  own  individual  uses. 

22.  It  is  necessary  to  provide  for  distributions  according  to  the 
federal  requirements  and  also  according  to  the  state  budget  or 
college  budget  classifications;   and  it  is  recommended  that  such  a 
form  of  ledger  page  be  adopted  as  will  satisfy  both  of  these  in  one. 

23.  For  ready  reference  and  use  in  controlling  expenditures  a 
summary  ledger  is  desirable;  and  it  is  recommended  that  this  show 
outstanding  obligations  as  well  as  balances  so  that  it  may  be  of  the 
greatest  value  by  presenting  complete  information  as  to  the  actual 
free  working  balance  for  each  department. 


CHAPTER  VIII 
SALARIES  IN  BUDGETS  AND  ACCOUNTING 

A.      RELATIVE   POSITION   OF  PAYMENTS  FOR  PERSONAL  SERVICE 

However  one  views  the  management  of  an  institution,  he  must 
consider  personal  service  the  most  important  consideration  involved. 
The  total  amount  assigned  to  payments  for  personal  service  is, 
with  the  possible  exception  of  occasional  large  items  for  permanent 
improvements  and  additions,  far  beyond  the  total  for  any  other 
division  of  the  budget,  and  this  makes  up  the  major  share  of  the 
cost  of  operation  of  every  college.  So  much  is  this  the  case  that 
sometimes,  where  there  is  an  incomplete  budget  system,  there  are 
but  two  classification  groups  under  operating  expenses,  namely, 
" salaries"  and  "current  expenses,"  the  latter  including  everything 
except  salaries  and  usually  being  in  the  aggregate  considerably  less 
than  the  former  in  amount. 

Because  of  their  dominant  importance,  at  some  institutions 
a  separate  budget  and  a  separate  ledger  are  kept  for  personal- 
service  allotments  and  expenditures.  The  inspection  of  any 
complete  budget,  such  as  that  used  in  Minnesota  for  example, 
will  impress  one  with  the  large  amount  of  space  devoted  to  salary 
items. 

The  adjustment  of  salary  rates  is  one  of  the  most  serious 
problems  faced  by  every  college  administration.  The  root  of  the 
problem  is  the  adequate  financing  of  the  type  and  size  of  staff 
which  the  administration  believes  should  be  in  an  institution;  and 
while  that  is  not  the  problem  with  which  this  study  is  concerned, 
it  is  important  that  the  mechanical  aspect  be  simplified  and  system- 
atized as  much  as  possible.  To  that  end  forms  will  be  presented 
for  the  making  of  appointments,  changes,  promotions,  etc.,  in  the 
staff,  for  the  recording  of  these,  for  the  budget  requests,  and  for 
other  parts  of  the  work  of  salary-fixing  and  salary-accounting. 

35 


36        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 
H.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  salaries  in  budgets 
and  accounting  appear  to  justify  the  following  conclusions  and 
recommendations : 

1 .  In  most  cases  salary  increases  do  not  date  from  the  beginning 
of  the  fiscal  year,  and  the  favorite  date  for  beginning  them  is 
September  i  for  instructors  and  July  i  for  other  employees;   and 
it  is  recommended  that  these  dates  be  used. 

2.  Some  complications,  more  or  less  unimportant,  are  caused  by 
the  lack  of  correspondence  between  the  salary  year  and  the  appro- 
priation year  or  fiscal  year,  but  no  inaccuracy  need  result  if  the 
records  are  properly  kept;  and  it  is  recommended  that  salaries  be 
charged  in  each  month  as  they  are  paid. 

3.  About  one-half  of  the  colleges  pay  their  salaries  in  twelve 
monthly  instalments,  while  others  vary  from  nine  to  twelve  accord- 
ing to  the  length  of  the  employment  period;  and  it  is  recommended 
that  the  uniform  practice  of  twelve  monthly  instalments  be  followed 
regardless  of  the  length  of  the  employment  period. 

4.  As  a  rule  there  is  no  fixed,  automatically  operating  schedule 
of  salaries,  but  in  one-half  of  the  cases  there  are  well-recognized 
ranges  of  salaries  for  the  various  grades  of  positions,  and  while  the 
fixed  schedule  insures  impartiality  and  certainty  to  the  members 
of  the  staff,  there  are  so  many  factors  besides  length  of  service 
entering  into  the  determination  of  the  comparative  worth  of  indi- 
viduals to  the  institution  that  it  is  recommended  that  a  range  of 
salaries  rather  than  a  fixed  schedule  be  followed. 

5.  Four  of  the  states  whose  colleges  were  visited  have  made 
some  attempt  to  "  standardize "  salaries,  but  it  appears  that  thus 
far  little  has  been  accomplished;  and  it  is  recommended  that  great 
care  be  exercised  in  such  endeavors  lest  the  result  may  detract  in 
some  manner  from  the  efficiency  of  the  college,  which  is  a  very 
different  type  of  institution  from  the  other  state-supported  institu- 
tions, departments,  and  agencies. 

6.  In  a  few  states  where  a  civil-service  system  operates  for 
the  selection  of  certain  types  of  employees,  the  results  have  been 

1  Sections  B-G  maybe  found  on  pages  173-92  of  typewritten  manuscript. 


SALARIES  IN  BUDGETS  AND  ACCOUNTING  37 

unsatisfactory  for  the  colleges;  and  it  is  recommended  that  in  such 
states  the  college  be  exempt  from  its  operation. 

7.  In  some  institutions  the  heads  of  departments  and  the  deans 
recommend  the  salaries  for  the  members  of  their  departments  and 
divisions  for  inclusion  in  the  budget;   and  this  is  recommended  as 
good  policy  and  in  accord  with  the  present  tendency  toward 
democracy  of  administration. 

8.  It  is  not  only  necessary  to  keep  an  account  of  the  budget 
allotments  and  the  payments  made  from  month  to  month  on 
salaries  in  accordance  with  the  budget  allotments,  but  it  is  also 
necessary  to  keep  an  accurate  record  of  changes  in  the  budget 
throughout  the  year,  and  for  this  purpose  ledger  forms  such  as 
those  in  use  at  the  Ohio  institution  are  recommended. 

9.  Some  institutions  require  the  departments  to  submit  each 
month  a  requisition  for  the  salaries  of  all  members  of  their  depart- 
ments;  but,  if  the  records  are  properly  kept  as  suggested  in  the 
foregoing  recommendation,  this  is  an  unnecessary  procedure;  and 
it  is  recommended  that  requisitions  be  not  required. 

10.  A  combination  check  and  receipt  for  the  payment  of  salaries, 
such  as  that  used  at  Indiana — perhaps  without  the  duplicate 
receipt  feature — seems  to  be  the  best  method  now  in  use  at  these 
colleges  for  this  purpose;  and  such  a  form  is  recommended. 

11.  It  is  desirable  to  send  a  formal  notice  to  the  party  of  chief 
interest,  and  to  send  copies  of  the  same  to  all  others  concerned, 
in  the  case  of  some  change  in  the  status  of  a  member  of  the  staff, 
or  of  a  new  appointment;  and  it  is  recommended  that  a  combina- 
tion form  similar  to  those  exhibited  in  this  chapter  be  available  for 
the  purpose. 


CHAPTER  IX 
MANAGEMENT  OF  SUPPLIES  AND  INVENTORIES 

A.      IMPORTANCE   OF  THIS  PHASE   OF  BUSINESS  MANAGEMENT 

In  the  purchasing  and  handling  of  various  commodities  and  in 
the  taking  and  keeping  of  inventories,  the  management  of  an 
educational  institution  parallels  the  management  of  an  industrial 
enterprise  perhaps  more  closely  than  at  any  other  point.  The 
application  of  the  methods  of  the  business  world  is  so  obviously 
needed  here,  and  so  apparently  possible  here,  that  in  practically 
all  of  the  colleges  we  find  a  better  organization  and  a  better  proce- 
dure in  this  connection  than  anywhere  else  in  their  entire  program 
of  activities.  This  may  be  due  to  the  alert  and  capable  business 
men  usually  found  in  charge  of  these  features  of  administration, 
but  it  is  also  due  to  the  precedents  long  established  in  trade  and 
industry. 

The  relative  importance  of  this  phase  of  business  management 
in  our  colleges,  especially  in  the  larger  universities,  where  thousands 
of  dollars'  worth  of  merchandise  in  great  variety  is  purchased  and 
must  be  accounted  for  each  month  of  the  year,  is  such  that  it 
merits  the  most  serious  attention  of  business  officials  in  order  that 
waste  may  be  avoided.  Frequently  a  considerable  stock  of  staple 
articles  must  be  kept  on  hand,  for  prompt  service  to  the  various 
departments  as  well  as  for  the  saving  which  comes  from  purchasing 
in  large  quantities.  The  inventory  is  important,  for  both  consum- 
able and  permanent  property.  In  some  cases  the  college  operates 
semicommercial  departments,  which  use  a  large  amount  of  supplies 
and  equipment,  and  in  some  instances,  like  printing  departments, 
turn  out  stock  to  be  sold  or  consumed  by  the  departments  of  the 
institution,  thus  adding  to  the  problem  of  handling  and  accounting 
for  supplies. 

The  various  systems  in  use  for  the  handling  of  supplies  and 
the  management  of  inventories  may  be  best  understood  from  the 
printed  forms  used.  These  are  quite  numerous  in  the  more  com- 

38 


MANAGEMENT  OF  SUPPLIES  AND  INVENTORIES  39 

plete  systems.  Enough  such  forms  are  reproduced  in  this  chapter 
to  enable  one  to  outline  a  system  adapted  to  the  needs  of  his  own 
institution. 

J.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  management 
of  supplies  and  inventories  appear  to  justify  the  following  con- 
clusions and  recommendations: 

1.  While  two-thirds  of  the  colleges  studied  exhibited  some  sort 
of  an  inventory,  in  only  one-third  of  them  was  found  a  systematic, 
cumulative  inventory;   and  it  is  recommended  that  such  an  in- 
ventory be  kept. 

2.  At  several  institutions  are  found  complete  card  files  with  an 
individual  card  for  each  article  included  in  the  permanent  equip- 
ment;  and  it  is  recommended  that  all  institutions  establish  such 
systems  as  may  be  found  at  Ohio,  Pennsylvania,  and  other  colleges. 

3.  In  taking  the  annual  inventory  it  is  the  practice  at  some  of 
these  institutions  for  a  representative  of  the  business  manager  to 
check  the  equipment  in  each  department  in  company  with  a 
representative  of  the  department;  and  this  plan  is  recommended. 

4.  In  a  few  institutions  it  is  the  custom  to  transcribe  inventory 
data  from  the  cards  on  which  they  are  first  recorded  to  large  record 
sheets,  and  this  appears  unnecessary  if  the  cards  are  well  arranged 
in  the  files;  and  in  the  interest  of  economy  of  time  it  is  recommended 
that  this  be  not  done. 

5.  In  two- thirds  of  the  colleges  certain  much  used  supplies  of  a 
staple  character  have  been  standardized  by  amount,  kind,  time  of 
delivery,  etc. ;  and  this  is  recommended  as  advisable. 

6.  Most  of  the  colleges  have  stores  of  supplies  more  or  less 
extensive,  the  stock  being  limited  to  such  articles  as  are  being 
constantly  called  for  in  the  different  departments;    and  this  is 
recommended  as  a  desirable  plan. 

7.  Some  institutions  buy  a  few  articles  on  specifications  prepared 
for  competitive  bids,  the  practice  in  most  cases  being  to  purchase 
in  the  open  market  by  current  quotations;  and  the  latter  is  recom- 
mended as  wiser  except  in  the  case  of  certain  special  supplies  used 
in  large  amounts  and  universally  standardized. 

1  Sections  B-I  may  be  found  on  pages  197-227  of  typewritten  manuscript. 


40         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

8.  Although  eight  of  the  states  have  state  purchasing  bureaus, 
in  only  one  case  is  it  compulsory  to  purchase  college  supplies 
through  the  state  bureau,  and  here  the  system  is  unsatisfactory; 
and  it  is  recommended  that  colleges  be  exempted  from  all  such 
requirements  with  the  privilege  of  using  such  means  in  any  case 
where  it  appears  advantageous  to  do  so. 

9.  As  a  rule  the  larger  colleges  have  completely  organized 
purchasing  offices,  and  their  methods  are  according  to  good  business 
principles;    and,  with  the  possible  exception  of  the  very  small 
institutions,  it  is  recommended  that    there  be  a  well-defined  pur- 
chasing division. 

10.  If  an  institution  be  too  small  to  justify  the  maintenance  of 
a  purchasing  division,  it  is  recommended  that  certain  printed  forms 
as  suggested  in  this  chapter  be  adopted  for  use  in  the  office  of  the 
treasurer,  business  manager,  or  other  officials  having  charge  of  the 
business  affairs. 

11.  In  the  few  cases  where  the  supplies  are  handled  in  an 
unsystematic  manner,  it  is  due  largely  to  the  fact  that  departments 
are  permitted  to  purchase  for  themselves;    and  this  is  not  good 
practice,  and  it  is  recommended  that  all  purchasing  be  centralized. 

12.  At  some  institutions   supplies   shipped  in   are  delivered 
directly  to  the  departments  for  which  they  are  intended,  sometimes 
resulting  in  loss  and  confusion,  due  largely  to  the  failure  of  shippers 
to  address  shipments  properly;  and  it  is  recommended  that  where 
practicable  all  goods  be  checked  on  invoices  by  a  receiving  clerk, 
and  where  this  cannot  be  done,  that  special  effort  be  made,  through 
labels  such  as  are  used  at  Wisconsin  or  other  devices,  to  insure 
proper  addressing  of  shipments. 

13.  Where  there  are  complete  systems  of  handling  supplies  they 
are  accounted  for  in  permanent  records,  but  at  no  place  does  it 
appear  possible  readily  to  ascertain  from  any  one  record  just  what 
supplies  used  in  a  given  period  were  bought  and  paid  for  in  that 
period,  and  what  were  brought  over  to  or  carried  over  from  that 
period;  and  it  is  suggested  that  a  summary  made  from  inventories, 
requisitions,  and  expenditure  records,  to  present  this  information 
in  one  statement,  would  be  helpful. 


MANAGEMENT  OF  SUPPLIES  AND  INVENTORIES  41 

14.  In  a  few  cases  funds  collected  from  students  for  laboratory 
supplies  or  breakage  are  used  by  the  department  independently,  but 
this  is  exceptional  and  is  not  good  business  practice;    and  it  is 
recommended  that  all  moneys  collected  for  any  purpose  be  handled 
by  the  central  business  office  and  disbursed  from  there  only. 

15.  With   very   few   exceptions   college   officials   are  satisfied 
with  their  present  systems  of  handling  supplies  and  do  not  anticipate 
making  any  changes,  and  in  most  cases  this  satisfaction  is  justified 
because  of  the  well-organized  systems  in  use;  but  it  is  recommended 
that  such  institutions  as  have  not  established  satisfactory  systems 
study  one  or  more  of  the  complete  systems  mentioned  in  this 
chapter  and  work  out  a  plan  adapted  to  their  needs. 

1 6.  Even  more  than  in  other  phases  of  business  management, 
the  printed  forms  used  are  a  true  index  to  the  completeness  and 
efficiency  of  the  system  in  use  for  handling  and  accounting  for 
supplies,  and  from  them  may  be  obtained  a  very  adequate  idea  of 
the  methods  followed;    and  it  is  recommended  that  institutions 
desiring  to  improve  their  methods  make  a  study  of  such  complete 
sets  of  forms  as  may  be  found  at  Wisconsin  and  Minnesota,  selecting 
and  adapting  such  as  meet  their  own  requirements. 

17.  A  complete  system  of  handling  and  accounting  for  supplies 
requires  that  proper  provision  be  made  for:    (a)  requisitioning, 
including  interdepartmental  business;    (b)  obtaining  quotations; 
(c)  issuing  purchase  orders;    (d)  following  up  orders;   (e)  receiving 
and  checking;    (/)  distributing  to  departments;    (g)  recording  all 
transactions;   and  (ti)  making  and  keeping  records  of  inventories; 
and  it  is  recommended  that  all  institutions  scrutinize  their  present 
methods  with  reference  to  these  requirements  to  discover  where 
improvements  can  and  should  be  made. 


CHAPTER  X 
COLLECTING,  PAYING,  AND  REPORTING 

A.      VARYING  PRACTICE   IN  THE  HANDLING   OF  FUNDS 

Collecting  and  handling  funds  at  land-grant  colleges  embraces 
the  collection  of  funds  granted  by  the  federal  government,  of 
amounts  appropriated  by  the  state,  of  charges  made  against  stu- 
dents, and  of  accounts  due  by  others  for  services  rendered  by  service 
departments  or  articles  sold.  It  is  well  to  consider  in  connection 
with  the  collection  of  funds  the  paying  of  accounts  to  those  within 
and  without  the  institution,  and  the  recording  of  all  such  transac- 
tions. 

Practice  in  the  handling  of  funds  varies  through  all  degrees 
from  the  institution  which  collects  from  every  source  available, 
handles  all  of  the  moneys,  and  pays  all  of  the  accounts,  as  at  R,1  to 
the  institution  which  handles  practically  nothing  but  the  collections 
from  students,  turning  in  its  receipts  to  the  state  office  designated 
to  receive  the  same,  the  latter  doing  all  the  accounting  and  paying 
all  the  bills,  as  at  P. 

In  the  larger  institutions  there  is  usually  a  well-organized 
bursar's  office,  which  attends  to  all  cash  transactions,  and  in  the 
smaller  institutions  the  treasurer  or  business  manager  makes  collec- 
tions through  clerks  under  his  immediate  supervision. 

J.2      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  collecting, 
payment,  and  reporting  of  funds  appear  to  justify  the  following 
conclusions  and  recommendations: 

i.  Except  in  the  case  of  living  expenses  there  seems  to  be  no 
clear  basis  for  the  amounts  charged  students  at  most  institutions; 
and  it  is  suggested  that  college  officials  should  compute  carefully 

1  In  the  complete  dissertation  the  institutions  in  the  group  studied  are  lettered  in 
order  to  make  the  data  impersonal. 

2  Sections  B-I  may  be  found  on  pages  232-66  of  typewritten  manuscript. 

42 


COLLECTING,  PAYING,  AND  REPORTING  43 

the  actual  need  for  certain  fees  and  the  necessary  amounts  to  cover 
the  purposes  for  which  they  are  intended. 

2.  Nowhere  are  fees  paid  by  students  segregated  to  the  specific 
purposes  for  which  the  names  of  the  fees  would  indicate  they  are 
intended,  the  custom  being  to  put  all  proceeds  from  such  sources 
into  the  ''general  fund";  and  it  is  suggested  that,  strictly  speaking, 
this  is  not  equitable  from  the  standpoint  of  the  students. 

3.  In  most  cases  where  colleges  conduct  dining-halls,  laundries, 
etc.,  for  students,  the  charges  are  based  on  as  near  actual  cost  as 
possible;  and  it  is  recommended  that  this  be  done,  precaution  being 
taken  to  protect  the  institution  against  loss. 

4.  The  purpose  of  college  fees  is  presumably  to  supplement  the 
appropriations  made  by  the  state;  and,  except  in  the  case  of  tuition, 
it  is  recommended  as  logical  that  the  proceeds  from  student  fees  be 
used  for  meeting  such  needs  as  the  state  does  not  usually  care  for, 
and  especially  such  as  relate  more  intimately  to  the  students  them- 
selves. 

5.  Although  in  some  states  the  collections  made  at  the  college 
are  used  there  without  restriction,  the  tendency  is  to  have  all  re- 
ceipts from  every  source  reported  for  reappropriation  by  the  legis- 
lature; and  where  this  is  done  care  should  be  taken  that  the  amounts 
appropriated  equal  in  each  case  at  least  the  amount  of  the  receipts 
for  the  given  purpose;   otherwise  it  is  not  equitable  for  those  who 
pay  these  amounts  for  certain  specific  purposes. 

6.  Practically  everywhere   students   are   required   to   pay  all 
college  charges  promptly  before  being  enrolled  in  classes,  conse- 
quently the  losses  from  this  source  have  been  quite  small;  and  it  is 
recommended  that  the  advance-payment  rule  be  strictly  enforced 
unless  the  student  can  give  a  form  of  security  satisfactory  to  the 
business  manager. 

7.  Practice  varies  in  the  handling  of  breakage  deposits  and 
similar  guaranties;    and  it  is  recommended  that  a  deposit  be  re- 
quired at  the  beginning  of  the  term,  which  shall  be  drawn  upon  from 
time  to  time  as  needed  to  cover  charges  against  the  student,  the 
balance  being  returnable  at  the  close  of  the  term. 

8.  A  few  institutions  permit  laboratory  deposits  or  similar  funds 
to  be  handled  by  the  departments  concerned,  but  this  is  not  the  best 


44         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

practice;  and  it  is  recommended  that  all  such  funds  be  handled 
by  the  business  office,  with  suitable  reports  exchanged  between  the 
central  office  and  the  departments,  by  means  of  a  form  similar  to 
that  used  at  Indiana. 

9.  Some  institutions  operate  departments  doing  commercial 
work,  and  permit  funds  to  be  collected  in  payment  therefor,  and 
perhaps  also  paid  out,  independently  of  the  central  business  office 
and  outside  of  the  regular  college  budget;  but  this  is  not  the  best 
practice,  and  it  is  recommended  that  all  such  matters  be  centralized 
in  one  general  business  office,  with  a  proper  system  of  exchanging 
information  with  the  departments,  and  that  all  such  business  be  in- 
cluded in  the  college  budget. 

10.  The  primary  object  of  a  college  is  education,  and  where 
commercial  work  is  done  in  any  department  it  must  take  second 
place  to  the  educational  interests  and  activities  of  the  department; 
and  it  is  recommended  that  care  be  taken  to  insure  that  the  re- 
ceipts from  commercial  work  shall  be  altogether  sufficient  to  cover 
the  expense  involved,  so  that  the  commercial  phase  will  always  be 
self-supporting  and  never  be  conducted  at  the  expense  of  the  educa- 
tional phase. 

11.  At  most  institutions  there  is  considerable  interdepartmental 
business;  and  it  is  recommended  that  such  transactions  be  carefully 
recorded  and  balanced  by  cross-vouchers  of  charges  and  credits  to 
indicate  the  true  conditions  in  the  departments  concerned. 

12.  It  is  customary  to  take  great  care  in  matters  of  reimburse- 
ment of  members  of  the  staff  for  personal  expenses  incurred  in 
traveling;  and  it  is  recommended  that  complete  vouchers  be  filed 
in  all  such  cases. 

13.  In  some  states  the  law  requires  that  an  affidavit  shall  be 
made  to   all  accounts   submitted  for  payment,  but  this  is  not 
usually  necessary;  and  it  is  recommended  that  it  be  required  only 
where  the  law  so  specifies  or  where  there  is  some  doubt  as  to  the 
validity  of  the  claim. 

14.  The  federal  requirements  as  to  vouchers  are  rigidly  enforced, 
and  for  this  and  other  reasons  it  is  recommended  that  great  care  be 
exercised  in  maintaining  a  complete  and  accurate  file  of  vouchers 
for  all  disbursements. 


COLLECTING,  PAYING,  AND  REPORTING  45 

15.  The  check- voucher  form  found  at  a  few  institutions  is  saving 
in  time  and  efficient  in  results ;  and  the  form  used  at  New  Jersey,  or 
a  similar  form,  is  recommended. 

1 6.  Where  departments  are  permitted  to  collect  funds,  they  are 
usually  required  to  report  the  same  promptly  to  the  central  business 
office;  and  it  is  recommended  that  this  be  required  in  all  cases. 

17.  While  in  some  institutions,  both  large  and  small,  it  is  re- 
quired that  the  collecting  officer  shall  make  a  daily  written  report  of 
all  collections  and  other  transactions  for  which  he  is  responsible, 
this  does  not  appear  necessary,  particularly  in  the  smaller  colleges, 
unless  the  written  report  is  intended  to  serve  as  a  cashbook  record; 
and  it  is  recommended  that  it  be  not  usually  required,  but  only 
where  conditions  seem  to  make  it  necessary. 

1 8.  Student  deposit  and  checking  systems  are  sometimes  found 
to  be  a  great  convenience;  and  the  forms  used  at  Connecticut  are 
recommended  as  suitable  for  this  purpose. 


CHAPTER  XI 

SOME  ADDITIONAL  CONSIDERATIONS  IN 
BUDGET-MAKING 

A.      DETERMINATION   OF   BASES  FOR  BUDGET-MAKING 

In  the  preceding  chapters  have  been  discussed  the  chief  considera- 
tions which  enter  into  the  making  and  using  of  budgets,  and  it 
remains  to  mention  a  few  miscellaneous  considerations.  Since  the 
purpose  of  the  budget  is  not  only  to  list  the  needs  for  an  ensuing 
period  and  to  give  comparative  data  from  preceding  periods,  but 
also  to  furnish  a  complete  analysis  of  the  organization  and  activities 
of  the  college,  everything  which  might  have  any  significant  influence 
in  shaping  the  budget  should  be  brought  into  consideration. 

The  participation  of  members  of  the  business  and  instructional 
staffs  in  budget-making  has  been  given  attention,  and  the  impor- 
tance of  accounting  as  furnishing  the  necessary  data  on  which  the 
work  of  budget-making  is  based  has  been  emphasized.  Classifica- 
tions and  the  printed  forms  used  in  the  process  of  compiling  the 
budget  have  been  illustrated.  Certain  special  phases  of  business 
management,  the  handling  of  personal-service  items,  the  manage- 
ment of  supplies  and  inventories,  and  the  collecting  and  paying  of 
accounts,  have  been  treated  at  length  because  of  the  important 
bearing  which  all  of  these  have  upon  the  making  of  the  budget  and 
its  use  after  completion. 

In  this  chapter  will  be  considered  some  general  policies  in 
budget-making,  and  the  part  which' a  few  more  or  less  important 
items  not  heretofore  mentioned  should  have.  These  items  include 
repairs,  insurance,  depreciation,  and  scholarships  and  student  aid. 

I.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  certain  general 
policies  and  special  considerations  in  budget-making  appear  to 
justify  the  following  conclusions  and  recommendations: 

i.  There  is  a  difference  in  the  degree  to  which  the  colleges  of 
the  group  permit  their  budget-making  to  be  influenced  by  the 

1  Sections  B-H  may  be  found  on  pages  272-81  of  typewritten  manuscript. 

46 


ADDITIONAL  CONSIDERATIONS  IN  BUDGET-MAKING  47 

closing  period's  facts  on  the  one  hand  or  by  the  ensuing  period's 
needs  on  the  other  hand;  and  it  is  recommended  that,  while  both 
should  be  taken  into  consideration,  the  chief  value  of  the  former 
should  be  for  comparison,  and  the  latter  should  have  the  greater 
influence  in  shaping  the  requests  for  a  progressive  institution  with 
plans  for  future  development. 

2.  There  is  nothing  to  show  that  anything  more  than  the  initial 
cost  of  new  activities,  buildings,  etc.,  is  taken  into  consideration 
when  these  are  put  into  budgets;   and  it  is  recommended  that  in 
most  cases  it  should  be  indicated  what  the  cost  of  operation  and 
maintenance  as  a  permanent  addition  to  the  annual  budget  will 
probably  be. 

3.  At  present  there  appears  to  be  no  effort  to  indicate  the  use 
and  non-use  of  building  space  in  making  requests  for  additional 
buildings,  except  general  statements  contained  in  campaign  litera- 
ture;   and  it  is  recommended  that  some  method  be  adopted  for 
exhibiting  definitely  the  extent  to  which  present  buildings  are  used, 
underused,  or  overtaxed. 

4.  While  some  institutions  have  endeavored  to  place  before  the 
public  their  needs  in  the  form  of  printed  statements,  and  these  are 
doubtless  useful  within  their  sphere,  it  is  recommended  that  the  bud- 
get be  the  chief  means  for  supplying  complete  and  accurate  data  to 
those  who  are  charged  with  the  responsibility  of  appropriating  funds. 

5.  While  there  seems  nowhere  a  consciously  directed  effort 
toward  preventing  the  business  or  non-educational  side  from  over- 
balancing the  educational  side,  and  while  it  may  hardly  be  said 
that  there  is  evidence  of  danger  in  this  direction  at  any  of  the 
colleges  of  the  group,  it  is  recommended  that  college  authorities 
and  the  general  public  give  careful  attention  to  this  important 
question  of  administration. 

6.  The  tendency  to  care  for  only  actual  current  needs  for 
repairs  has  in  some  cases  led  to  a  general  deterioration  of  buildings 
so  that  now  large  sums  will  be  necessary  to  rehabilitate  them;  and 
it  is  recommended  that  each  year  an  effort  be  made  to  provide  for 
such  special  repairs  or  renewals  as  are  needed  to  keep  the  physical 
plant  in  an  efficient  condition  and  preserve  it  as  far  as  possible  for 
the  future. 


48        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

7.  In  one-half  of  the  states  included  in  the  group  no  state-owned 
property  is  insured;    but  it  is  suggested  that  this  is  of  doubtful 
advisability  from  the  standpoint  of  the  college  unless  some  provision 
is  made  for  the  replacement  of  lost  property. 

8.  Where  there  is  a  reserve  fund  to  provide  for  the  replacement 
of  lost  property  in  states  where  state-owned  property  is  not  insured, 
this  is  a  desirable  arrangement;   but  it  is  recommended  that  the 
college  be  not  required  to  contribute  to  this  reserve  fund,  and  in  no 
case  should  such  a  contribution  exceed  the  amount  that  would  have 
to  be  paid  in  premiums  to  insurance  companies  to  secure  the  same 
amount  of  protection. 

9.  Where  insurance  must   be   carried   by   an    institution   in 
order  to  protect  itself  against  property  loss,  this  should  be  in  the 
form  of  a  "blanket  policy, "  or  of  a  " schedule, "  covering  the  entire 
plant,  and  not  in  the  form  of  policies  on  individual  buildings;  and 
it  is  also  recommended  that  the  premiums  be  distributed  as  equally 
as  possible  among  the  years,  unless  the  state  makes  a  special 
appropriation  in  certain  years  to  cover  the  insurance  which  falls  due. 

10.  In  five  cases  some  effort  has  been  made  to  compute  deprecia- 
tion and  allow  for  it  in  the  budget;   and  it  is  recommended  that 
college  officials  consider  the  advisability  of  including  in  each  budget 
an  amount  for  depreciation  which  could  be  permitted  to  accumulate 
gradually  as  a  replacement  fund  for  use  when  the  buildings  and 
equipment  reach  the  end  of  their  service. 

11.  Scholarships  and  student-aid  funds  are  ordinarily  adminis- 
tered by  officers  outside  of  the  college  business  organization  for  the 
assignments  to  beneficiaries,    and   by  the  business   officials   for 
the  actual  handling  of  the  funds;    and  this  is  recommended  as 
the  logical  and  best  procedure. 

12.  In  most  cases  scholarships  and  student-aid  funds  do  not 
figure  in  the  budget;  but  it  is  recommended  that,  in  order  to  make 
the  budget  complete,  estimated  receipts  for  these  purposes  should 
be  included  and  reappropriated  exclusively  to  these  purposes. 

13.  The  tendency  in  the  employment  of  student  labor  is  to 
leave  it  to  each  department  to  employ  its  own  and  charge  it  against 
its  labor  account;  but  in  such  cases  it  is  recommended  that  there 


ADDITIONAL  CONSIDERATIONS  IN  BUDGET-MAKING  49 

be  a  uniform  rate  of  compensation  established  by  the  business 
office. 

14.  In  the  great  majority  of  cases  officials  appear  to  be  pleased 
and  satisfied  with  the  budget-making  and  budget-using  methods 
now  followed  at  their  institutions;  but  it  is  suggested  that  most  of 
them  could  doubtless  profit  by  a  study  of  the  systems  in  use  at 
other  institutions,  and  an  exchange  of  ideas  and  experiences  should 
prove  helpful. 

15.  No  results  were  secured  in  an  effort  to  supplement  the 
questions  asked  in  this  investigation  and  to  secure  additional  data; 
but  it  is  recognized  that  considerable  additional  worth-while  data 
could  be  secured  at  these  institutions  by  following  up  certain  lines 
of  inquiry,  and  it  is  recommended  that  this  be  done  by  those  who 
are  interested  in  establishing  or  improving  budget  systems  or  any 
portion  thereof. 


CHAPTER  XII 
REPORTING  FINANCIAL  FACTS 

A.   PURPOSE  AND  IMPORTANCE  OF  REPORTING 

Publicity  concerning  the  finances  of  an  institution  is  sure  to  be 
advantageous  to  it  in  the  long  run,  even  though  at  times  it  may 
appear  that  it  is  unwise  to  make  certain  financial  facts  known.  Yet 
colleges  have  not  always  been  ready  to  accept  this,  and  meager 
reports  have  been  often  found,  especially  previous  to  the  present 
decade.  The  law  in  some  states  requires  that  state-supported 
institutions  shall  print  annually  details  of  their  financial  manage- 
ment, but  often  these  reports  are  in  a  form  which  makes  no  appeal 
to  the  reader  and  they  remain  unread. 

Every  state  institution  owes  it  to  the  public  to  make  known  in 
an  intelligible  manner  its  financial  status,  and  to  keep  the  people 
informed  produces  a  reaction  on  the  institution,  which,  if  the  work 
that  it  is  doing  be  worthy,  should  be  favorable  and  strengthening. 
The  land-grant  college,  by  reason  of  the  fact  that  a  portion  of  its 
support  comes  from  national  funds,  is  under  an  even  greater  obliga- 
tion to  present  its  financial  facts  to  the  people.  The  very  fact  that 
the  federal  government  has  required  that  this  be  done,  in  a  limited 
measure,  has  helped  these  institutions. 

As  important  as  financial  reporting  is,  it  must  be  admitted  that 
comparatively  few  people  are  interested  in  statistical  and  financial 
reports  enough  to  read  them  and  try  to  understand  them,  although 
many  more  would  probably  say  that  they  ought  to  be  available. 
There  are  those,  however,  who  are,  or  of  a  right  ought  to  be,  very 
much  interested  in  such  reports,  for  instance,  the  administrative 
officials  of  other  institutions,  national  and  state  officers,  members 
of  the  state  legislatures,  trustees,  alumni,  friends,  and  various 
individuals  who  for  one  reason  or  another  are  interested  in  college 
education  and  especially  in  its  cost.  In  some  cases  a  complete 
financial  statement  may  have  a  determining  influence  in  bringing 
better  support  or  substantial  gifts  to  an  institution. 

50 


REPORTING  FINANCIAL  FACTS  51 

The  contents  of  every  report  essaying  to  set  forth  the  financial 
status  of  a  college  should  include  the  assets  and  liabilities,  the 
income  and  expenditures,  in  such  an  analytical  form  and  in  such 
detail  as  may  be  necessary  to  exhibit  in  a  complete  and  significant 
form  the  facts.  Summaries  and  detailed  schedules  both  have  a 
place  in  such  a  report.  The  significant  types  of  expenditure  should 
be  readily  discernible.  The  report  should  cover  the  fiscal  period, 
and  should  be  ready  for  distribution  as  soon  after  the  close  of  each 
year  as  possible. 

G.1      CONCLUSIONS  AND  RECOMMENDATIONS 

The  data  presented  in  this  chapter  concerning  the  reporting  of 
financial  facts  appear  to  justify  the  following  conclusions  and 
recommendations : 

1.  It  is  customary  for  the  report  of  the  president  of  the  college 
to  be  printed  regularly,  but  in  many  instances  this  does  not  include 
the  reports  of  business  officials,  which  are  often  published  sepa- 
rately; and  it  is  recommended  that,  while  in  the  larger  institutions 
it  is  not  altogether  undesirable,  in  most  cases  the  financial  report 
should  not  be  published  separately,  but  as  a  part  of  the  report  of 
the  president. 

2.  A  majority  of  the  financial  reports  are  issued  annually,  but 
a  few  are  issued  biennially,  and  some  colleges  publish  none ;   and  it 
is  recommended  that  all  institutions  publish  an  annual  report. 

3.  The  financial  report  is  usually  available  for  distribution  in 
printed  form  to  all  who  may  be  interested;  and  it  is  recommended 
that  it  be  given  as  wide  a  circulation  as  may  be  necessary  to  reach 
all  who  should  be  interested  in  the  finances. 

4.  While  one-half  of  the  institutions  in  the  group  claimed  to 
have  a  balance  sheet,  the  reports  of  only  four  show  what  may  be 
considered  a  real  balance  sheet;  and  it  is  recommended  that  every 
financial  report  covering  a  year  include  a  regular,  clearly  set-up 
balance  sheet  of  current  assets  and  liabilities,  with  also  investment 
assets  if  there  be  any,  and  educational  plant,  endowments,  etc. 

5.  In  practically  all  cases  there  is  a  record  of  property  valuations, 
and  this  record  is  printed  in  about  one-half  of  the  financial  reports, 

1  Sections  B-F  may  be  found  on  pages  286-301  of  typewritten  manuscript. 


52        A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

but  in  many  instances  these  are  merely  the  original  costs;  and  it 
is  recommended  that  deductions  be  made  annually  for  depreciation, 
with  corresponding  additions  for  repairs  and  improvements. 

6.  While  in  some  cases  property  valuations  are  shown  in  lump 
sum  in  the  balance  sheet,  nowhere  do  they  appear  to  be  mentioned 
in  the  budget;    and  it  is  recommended  that  a  list  of  valuations 
showing  deterioration  of  the  physical  plant  be  included  with  the 
budget    in    making    requests    for    appropriations    for    repairs, 
remodeling,  renovation,  and  replacement. 

7.  Trust  funds,  endowments,  and  investments,  while  included 
in  the  financial  report,  are  usually  not  mentioned  in  the  budget;  and 
it  is  recommended  that  they  be  included  in  the  budget  as  far  as  may 
be  necessary  to  exhibit  the  sources  of  certain  income  items,  since  it  is 
advisable  that  the  budget  show  all  the  income  of  the  college  and 
the  sources  from  which  it  is  derived. 

8.  There  is  great  variety  in  the  financial  reports  of  the  colleges 
in  the  group,  only  a  few  being  complete  and  arranged  so  that 
information  may  be  had  readily  and  accurately;   and  it  is  recom- 
mended that  financial  officers  study  the  forms  of  such  reports  as 
those  of  Illinois,  Ohio,  Wisconsin,  and  New  Jersey,  with  a  view  to 
revising  their  present  form  of  reporting. 

9.  The  most  important  portions  of  a  report  are  the  analyses  of 
income  and  expenditure,  the  summaries  of  these,  and  the  balance 
sheet  of  assets  and  liabilities;  and  it  is  recommended  that  these  be 
tabulated  in  such  a  manner  as  to  exhibit  the  significant  facts  in 
clear  and  compact  form. 

10.  The  financial  reports  of  colleges  at  present  are  far  from 
uniform  in  either  content  or  method  of  presentation,  making  it 
difficult  if  not  impossible  to  secure  from  them  adequate  comparable 
data;   and  it  is  recommended  that  the  schedules  of  the  Carnegie 
Foundation,  or  the  outlines  of  the  Association  of  Business  Officers 
of  the  Middle  Western  Universities,  be  followed  until  some  better 
system  be  devised. 

11.  Since  neither  of  the  systems  mentioned  in  the  foregoing 
paragraph  appears  to  satisfy  fully  the  requirements  of  a  complete 
report  from  a  land-grant  college,  it  is  suggested  that  the  business 


REPORTING  FINANCIAL  FACTS  53 

officials  from  the  colleges  in  this  group  meet  and  adopt  a  system 
of  uniform  reporting. 

12.  The  comparison  of  income  and  expenditure  over  a  period 
of  years,  as  shown  in  the  Illinois,  Ohio,  Wisconsin,  and  other 
reports,  is  useful;  and  it  is  recommended  that  all  institutions  include 
such  data,  covering  at  least  six  years — and  for  some  years  to  come 
the  period  should  sufficiently  antedate  the  world-war  to  indicate 
comparisons  for  normal  conditions. 

13.  The  distribution  of  overhead  and  of  service  supplied  by 
central  utilities,  as  is  contained  in  the  Wisconsin  report,  is  useful; 
and  it  is  recommended  that  such  distributions  be  made  in  all 
reports  as  far  as  practicable. 

14.  The  outstanding  obligations  or  incumbrances  are  of  much 
significance  in  determining  the  real  financial  status  of  an  institution, 
but  they  are  found  in  only  one  of  the  reports  reviewed  in  this  group ; 
and  it  is  recommended  that  all  reports  include  such  a  statement. 

15.  Statistical  facts  can  be  presented  effectively  in  many  cases 
by  the  use  of  charts  or  diagrams;   and  those  used  in  the  Illinois 
report  are  commended  as  examples  of  what  might  be  done  in  all 
financial  reports,  to  the  advantage  of  all  concerned. 

1 6.  While  most  of  the  more  complete  financial  reports  contain 
a  table  of  contents,  only  a  few  have  an  index;  and  it  is  recommended 
that,  at  least  in  the  larger  reports,  a  subject  index  also  be  included. 

17.  It  is  customary  to  print  at  the  beginning  of  financial  reports 
a  letter  of  transmittal;  and  it  is  recommended  that  this  letter  call 
attention  to  certain  unusual  features,  or  to  facts  which  are  of 
particular  significance,  in  the  report,  with  a  brief  explanation 
where  necessary. 

1 8.  It  is  the  duty  of  every  state-supported  institution  to  keep 
the  public  informed  as  to  its  financial  status,  and  this  is  particularly 
true  of  the  land-grant  college;    therefore,  it  is  recommended  that 
the  content  and  form  of  financial  reports  in  these  colleges  be  care- 
fully considered,  and  that  every  effort  be  made  to  convey  adequately 
and  clearly  to  the  public  the  information  which  is  desired. 


CHAPTER  XIII 
OBJECTIVES  AND  RESULTS 

A.      COLLEGE   OBJECTIVES  AS  DETERMINING  SUPPORT 

The  support  which  any  enterprise  may  expect  to  receive  is  de- 
pendent upon  the  aims  and  purpdses  which  the  enterprise  has 
clearly  in  view,  and  the  degree  to  which  it  uses  the  facilities  at  its 
disposal  for  the  attainment  of  these  aims  and  purposes.  The  chief 
business  of  a  college  is  to  train  minds  and  develop  characters  for 
service  to  its  nation,  to  its  state,  and  to  its  special  clientele.  There 
are  certain  objectives  which  apply  alike  to  all  colleges;  but  the 
college  which  is  supported  by  the  national  and  state  governments  is 
concerned  with  some  of  these  in  an  intensified  degree,  and  such 
colleges  have  perhaps  additional  objectives  which  must  be  of  great 
significance  in  their  work  and  in  their  support. 

Leaders  of  our  national  thought  sixty  years  ago  sensed  the  ob- 
jectives which  the  nation  should  aim  at  in  its  educational  efforts, 
hence  the  establishment  of  the  land-grant  colleges.  The  states 
gradually  did  the  same  thing.  The  chief  concern  of  a  state  should 
be  the  development  of  intelligence  and  integrity  among  its  citizens, 
since  this  is  the  sole  foundation  for  permanent  progress  and  prosper- 
ity. Material  resources  are  an  immense  advantage  to  a  state,  but 
brain  power  is  necessary  to  bring  them  to  fruition.  The  objectives 
of  any  state-supported  institution  must  be  to  do  what  the  state 
needs  to  have  done  by  that  particular  institution.  All  claims  for 
support  from  the  state  must  be  based  upon  clearly  defined  needs  to 
meet  these  objectives.  Only  in  the  degree  to  which  a  state  college 
uses  its  facilities  to  meet  the  demands  of  the  state  rightfully  made 
upon  it  can  it  expect  support  from  the  state;  and,  conversely,  only 
in  the  degree  to  which  the  state  supports  its  state  college  can  the 
state  reasonably  expect  that  college  to  meet  the  demands  of  the 
state.  Objectives  and  support  are  thus  inseparably  connected  in 
our  state  colleges. 

54 


OBJECTIVES  AND  RESULTS  55 

The  field  of  the  land-grant  college  is  more  definitely  marked  out 
for  it  than  perhaps  that  of  any  other  type  of  educational  institution 
of  its  grade.  The  national  legislation,  which  has  been  referred  to  in 
foregoing  chapters,  and  the  accompanying  expressions  in  Congress 
when  such  legislation  was  pending,  quite  clearly  indicate  the  objec- 
tives which  this  type  of  college  should  set  for  its  work.  One-half  of 
these  institutions  are  parts  of  state  universities;  but  because  of 
federal  limitations,  whether  this  be  the  case  or  the  college  is  an  in- 
dependent institution,  the  sphere  of  the  land-grant  college's  efforts 
is  defined.  Its  objectives  lie  within  the  range  of  resident  instruction 
in  agriculture,  mechanic  arts  (or  engineering),  and  the  applied 
sciences,  of  research  in  all  of  these,  but  particularly  in  agriculture, 
and  of  extension  service  particularly  in  agriculture  and  home  eco- 
nomics. To  these  well-known  functions  have  been  recently  added 
the  duty  of  training  teachers  in  agriculture,  in  trades  and  indus- 
tries, and  in  home  economics,  and  rehabilitation  work  for  ex-service 
men. 

The  land-grant  college  in  each  state  was  established  primarily 
for  the  education  of  the  youth  of  that  particular  state  for  useful 
professional  careers  along  the  lines  mentioned  in  the  preceding 
paragraph.  The  selection  of  particular  fields  of  work  in  each  case 
should  depend  upon  what  the  state  needs  for  the  development  of  its 
own  resources.  This  is  entirely  in  accord  with  the  spirit  of  the 
federal  laws.  The  first  duty  of  those  charged  with  the  responsi- 
bility of  administering  such  an  institution  should  be  to  ascertain  as 
far  as  may  be  practicable  what  the  state  needs  to  have  done  by  the 
institution.  Having  thus  set  the  objectives  of  the  work,  then,  and 
not  until  then,  may  plans  for  operation  and  development  be  formu- 
lated intelligently  and  sanely.  Having  once  determined  positively 
what  the  job  is,  the  proper  organization  for  its  efficient  and  economic 
performance  can  be  settled  upon,  and  on  this  basis  estimates  can  be 
made  of  the  amounts  needed.  Any  other  procedure  is  illogical  and 
apt  also  to  be  wasteful. 

The  procedure  outlined  in  the  preceding  paragraph  should  lead 
to  the  compilation  of  a  budget  based  on  facts  and  on  accurately 
stated  needs  to  reach  clearly  defined  objectives;  and  such  a  budget 
should  command  the  most  serious  and  sympathetic  consideration 


56       A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

at  the  hands  of  the  powers  charged  with  the  responsibility  for  pro- 
viding funds.  This  basis  for  appropriating  the  public  revenue  will 
be  recognized  as  being  the  antithesis  of  the  methods  that  have 
usually  been  followed  in  past  years;  but  the  signs  of  the  times 
indicate  a  tendency  in  this  direction. 

H.1      CONCLUSIONS  AND   RECOMMENDATIONS 

The  data  presented  in  this  chapter  appear  to  justify  the  following 
conclusions  and  recommendations: 

1.  Wherever  the  budget  system  has  been  established  in  a 
reasonably  complete  way  and  given  fair  trial,  it  is  conceded  to  be  a 
great  advantage  to  the  institution  in  securing  better  business  man- 
agement, greater  economy,  and  increased  efficiency;  and  it  is  recom- 
mended that  institutions  which  have  not  adopted  such  a  system  do 
so  as  soon  as  possible,  even  though  there  is  no  state  budget  system. 

2.  In  most  cases  where  there  is  a  budget  system  for  the  state, 
there  appears  to  be  reason  for  believing  that  it  has  aided  in  secur- 
ing increased  support  from  the  state  for  the  college;  and  it  is  recom- 
mended that  college  authorities  in  all  states  where  there  is  no  state 
budget  system  encourage  the  inauguration  of  one. 

3.  As  to  the  effect  of  the  budget  system  on  the  staff  of  an  institu- 
tion, opinion  seems  to  favor  it  as  having  brought  greater  confidence, 
more  certainty  as  to  the  financial  status,  and  increased  co-operation 
among  the  members;    and  it  is  recommended  that  all  colleges 
develop  their  budget  systems  to  the  point  of  highest  efficiency. 

4.  While  there  is  a  lack  of  positive  evidence,  the  opinion  seems 
to  prevail  that  the  general  effect  of  a  budget  system  on  the  people  of 
a  state  is  to  inspire  confidence  in  the  management  of  public  finances 
and  other  public  affairs;  and  it  is  recommended  that  college  officials 
encourage  the  establishment  of  state  and  college  budget  systems 
with  this  end  in  view. 

5.  In  but  few  cases  did  the  officials  of  the  colleges  suggest  ways 
in  which  the  budget  system  may  be  extended,  and  some  are  opposed 
to  any  extension;  but  there  are  such  ways,  and  it  is  recommended 
that  extensions  be  made  to  enable  the  institution  in  each  case  to 
derive  the  maximum  benefit  from  such  a  system. 

1  Sections  B-G  may  be  found  on  pages  308-17  of  typewritten  manuscript. 


OBJECTIVES  AND  RESULTS  57 

6.  Practically  nothing  has  been  done  in  the  colleges  to  extend 
the  budget  system  or  the  budget  idea  to  the  management  of  student 
organizations,  or  to  help  individual  students  to  manage  their  finan- 
cial affairs;  but  there  are  possibilities  along  this  line,  and  it  is  recom- 
mended that  institutions  seek  to  develop  such  possibilities. 

7.  Only  a  few  of  these  colleges  teach  budget-making  in  any  form 
in  their  instructional  departments,  and  there  is  practically  nothing 
taught  concerning  public  budget-making;   and  it  is  recommended 
that  courses  in  budget-making,  budget-using,  financial  reporting, 
and  related  subjects,  be  included  in  at  least  a  brief  form  in  the  regu- 
lar work  of  some  department  or  departments  of  every  institution  of 
this  type. 

8.  Very  little  is  being  done  to  regulate  the  expenses  of  students 
for  objects  outside  of  the  regular  college  charges,  and  it  is  suggested 
that  there  are  possibilities  here  for  an  extension  of  the  budget  idea 
which  should  be  realized. 

9.  Most  of  the  colleges  appear  hopeful  of  obtaining  increased 
funds  for  support  and  development  in  the  near  future,  some  by 
special  campaigns  among  alumni  and  friends  and  some  by  larger 
appropriations  from  the  state  or  by  an  increased  tax  rate  (where 
there  is  a  mill  tax) ;  and,  since  it  is  apparent  that  the  most  promising 
permanent  source  for  support  is  the  state,  it  is  recommended  that 
each  college  seek  to  serve  its  own  state  to  the  maximum  degree,  in 
order  to  justify  its  claims  for,  and  to  better  its  chances  of,  securing 
adequate  funds  for  its  operation  and  development. 

10.  About  two-thirds  of  the  colleges  have  conducted  recently,  or 
are  now  conducting,  a  campaign  for  funds,  among  alumni  and 
friends,  but  in  a  number  of  cases  only  partial  success  has  attended 
such  efforts;  and  it  is  suggested  that  the  present  is  not  a  favorable 
time  for  raising  funds  in  this  manner,  and  an  institution  should 
deliberate  long  and  carefully  weigh  all  sides  of  the  matter  before 
launching  such  an  effort. 

IT.  A  majority  of  the  institutions  present  some  evidence  of  what 
may  be  termed  "  scientific  business  management,"  but  there  is  great 
difference  in  the  degree  to  which  this  exists;  and  it  is  recommended 
that  those  who  are  interested  in  the  introduction  of  business  meth- 
ods study  the  systems  in  use  at  such  institutions  as  Illinois,  adopting 


58         A  STUDY  OF  BUSINESS  ADMINISTRATION  OF  COLLEGES 

the  features  which  appear  to  them  to  be  applicable  to  their  own 
institutions  and  adapting  these  to  meet  the  conditions  there  existing. 
12.  While  comparatively  little  has  thus  far  been  accomplished  in 
the  way  of  special  financial  studies  on  a  scientific  basis,  there  is 
promise  of  something  in  the  near  future  at  about  one-third  of  the 
colleges  in  the  group;  and  it  is  recommended  that  wherever  there 
are  members  of  the  staff  prepared  to  undertake  such  studies  they 
should  be  encouraged  to  do  so,  and  as  far  as  possible  allowed  ample 
time  for  the  work. 


YC 


04057 


* 


